Preliminary Results 2015

RNS Number : 4753R

Hochschild Mining PLC

09 March 2016

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9 March 2016

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2015

Financial Results highlights¹

§ Net revenue of $469.1 million (2014: $493.0 million)

§ Adjusted EBITDA of $138.8 million (2014: $135.6 million)²

§ Earnings per share of $(0.14) (2014: $(0.13))

§ Cash balance of $84.0 million as at 31 December 2015 (31 December 2014: $116.0 million)

§ Net debt of $350.5 million as at 31 December 2015 (30 June 2015: $455.6 million)

§ Net debt/EBITDA of 2.5x as at 31 December 2015 (30 June 2015: 5.8x)

§ Non-cash post tax impairment charges of $170.6 million

Strong 2015 operational delivery

§ 2015 All per silver equivalent ounce from operations reduced by 26% to $12.9 exceeding guidance³

§ Inmaculada AISC per silver equivalent ounce significantly below guidance at $7.3

§ Full year production of 27.0 million attributable silver equivalent ounces exceeding guidance⁴

§ Inmaculada mine produced 8.3 million silver equivalent ounces exceeding guidance

Improved financial position

§ $100 million equity rights issue completed

§ $105 million of debt repaid in Q4

§ Argentina macroeconomic and tax reforms already significantly improving San Jose cash flows

o Removal of export tax on dore and concentrate confirmed

o Ongoing devaluation of Argentine peso reducing operating costs

§ Cashflow further protected by additional 2016 precious metal hedges:

o 15,000 ounces of gold at $1,244 per ounce

o Zero cost collar for 3.0 million ounces of silver with a floor of $14.0 per ounce and a cap of $17.6 per ounce

o 55% of total 2016 attributable production target now hedged

2016 Outlook

§ Record attributable production target of 32.0 million silver equivalent ounces

§ AISC now expected to be $12.0-12.5 per silver equivalent ounce (previous guidance of $12-13 per ounce)

§ Inmaculada AISC expected to be $9-10 per silver equivalent ounce

§ Total sustaining and development capital expenditure expected to be approximately $100 million including $10 million to develop Pablo vein

$000, pre-exceptional unless stated	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Attributable silver production (koz)	14,752	16,187	(9)
Attributable gold production (koz)	166	101	64
Net revenue⁵	469,146	492,951	(5)
Adjusted EBITDA	138,837	135,586	2
Loss from continuing operations	(66,399)	(56,689)	(17)
Loss from continuing operations (post-exceptional)	(239,657)	(70,831)	(238)
Earnings per share ($ pre-exceptional)	(0.14)	(0.13)	(8)
Earnings per share ($ post-exceptional)	(0.52)	(0.16)	(225)

Commenting on the results, Ignacio Bustamante, CEO, said:

"Now that the Company's key investment in the low cost Inmaculada project is complete and with strong operational performance at the mine, the outlook for the Company is much brighter. Together with the encouraging geological results achieved at our existing mines, further substantial cost and debt reductions and a much more positive environment in Argentina, the improvement to profitability is now a reality."

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A presentation will be held for analysts & investors at 9.30am (UK time) on Wednesday 9 March 2016 at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN

For a live webcast of the presentation please visit our website:

www.hochschildmining.com

To join the event via conference call, please see dial in details below:

+44(0)20 3427 1915 (Please quote confirmation code 5064692)

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Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 3714 9044

Head of Investor Relations

Hudson Sandler

Charlie Jack +44 (0)207 796 4133

Public Relations

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About Hochschild Mining plc:

Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.

CHAIRMAN'S STATEMENT

Hochschild Mining has ended 2015 in a significantly enhanced operational and financial position compared to twelve months ago. The Company's key investment in the low cost Inmaculada project is now complete and I am delighted by the first six months of strong operational performance. Together with the encouraging geological results achieved at our existing mines and further cost reductions, the expected improved profitability is now a reality. In addition, the Company has taken decisive steps to reduce the debt position via the equity capital raise in the autumn and has taken a conservative approach to protect cashflows through a series of precious metal hedges. With these measures, the leverage ratios have materially improved and are reflecting the enhanced financial health of the business.

We were able to achieve first dore production at Inmaculada in early June 2015, marking the final stage for a project that has taken approximately six years from discovery to commissioning, a notable accomplishment in these turbulent times for the industry. The subsequent ramp-up process was smoothly executed with key operational metrics running according to or above design capacity. During the last quarter, our long-held confidence in the world class characteristics of this deposit was supported by production, costs and ultimately cashflows that surpassed our expectations. The Board believes that the entire process has been to the great credit of our management and operational and project teams who have efficiently dealt with the geological, operational and financial challenges of a new mining operation while ensuring the safety of our workforce and with due respect to the surrounding environment.

Precious metals once again experienced a volatile period with both silver and gold reaching new five year lows whilst other commodities such as oil, copper and iron ore also experienced sharp declines. Despite this difficult environment, our existing operations generated positive cashflows under revised operational plans and I was particularly encouraged by the success of our brownfield exploration programme which not only yielded the discovery of the Pablo vein thus reinvigorating Pallancata but also allowed Arcata to continue to prove its resilience. Later on in the year, there were positive macroeconomic and political developments in Argentina which have led us to believe that we are entering a new era of stronger cashflow generation at our high grade San Jose mine. In short, lower prices have once again been compensated by lower costs, rising production and new higher grade resources at key operations.

The careful management of our financial position was of paramount importance during the year so the success of several Company initiatives has been crucial. Firstly, the Company ensured the full financing of the Inmaculada project via a combination of short and long term debt. Secondly, a target of positive cashflow generation was set at all of our operations (before the effect of hedging) resulting in a high level of cost discipline at each operating asset. Finally, with the new mine having commenced production smoothly, we were able to raise $100 million via a rights issue with the proceeds used to pre-pay and renegotiate debt. We now have a comfortable debt amortisation profile and a solid cash position. However, despite these positive results, the Board remains alert to price volatility and is maintaining its focus on continuing to repay debt and consequently is not recommending reinstating a dividend payment. We remain committed to delivering shareholder returns and the Board intends to review the position again once the Company can sustainably achieve strong margins and the debt position is further reduced.

Operating Responsibly

I am delighted to report that 2015 was unprecedented in that it represented the second consecutive year in which we achieved our long-term aim of zero fatalities. In addition, the Group succeeded in reducing the year-on-year frequency of accidents as well as their severity by approximately 40% and 25% respectively. This is to the great credit of the many teams who, despite the limitation of resources, have worked relentlessly to ensure that we provide a safe workplace for all and to convey the non-negotiable message that safety comes first. As to our efforts to minimise our impact on the environment, I am pleased to report that we maintained our ISO 14001 certification, adopted a new and more robust Corporate Environmental Policy and KPI dashboard to strengthen the Group's environmental culture and made significant strides in water management. In relation to our interaction with local communities, we have continued to run the many programmes designed around our core themes of education, health and socio-economic development. Further details on the individual projects we have supported during the year can be found in our Sustainability Report and online.

Board

I wish to thank my fellow Board members for their valuable insight during the year. As reported last year, we suspended our Non-Executive succession plan to provide continuity at Board level given the difficult trading climate. The status of the plan was kept under review during 2015 and, in recognition of the benefits of a refreshed Board, resulted in the appointment of Michael Rawlinson as a Non-Executive Director with effect from 1 January 2016. I am very pleased that we have been able to secure someone with Michael's experience and knowledge of the mining sector which will undoubtedly prove invaluable during our Board deliberations. In line with our succession plan, Sir Malcolm Field will be retiring from the Board at the conclusion of the forthcoming AGM. Sir Malcolm has served on the Board since the Company's IPO in 2006 with tireless dedication and on behalf of my fellow Directors, I wish to express my profound gratitude for his support and wise counsel.

Outlook

We enter 2016 with renewed optimism. Inmaculada is a flagship producing asset operating at highly competitive costs and is expected to provide the financial stability necessary for targeting future growth plans. The operating environment in Argentina is rapidly improving and we believe that our high grade resource at San Jose will soon generate stronger cashflows. And finally, the optionality that the Arcata and Pallancata assets offer us in terms of geological potential as well as leverage to prices is a key feature that we expect to develop in this coming year.

Eduardo Hochschild, Chairman

8 March 2016

CHIEF EXECUTIVE OFFICER'S STATEMENT

At the start of last year, I noted that the Company's key objectives for 2015 were the commissioning of our new flagship mine, success from our brownfield exploration programme and achieving a stronger overall financial position by the year end. We are pleased to report that we have largely succeeded in our priorities and that we enter 2016 with confidence that, whilst the outlook for natural resources remains volatile, the prospects for the Company have substantially improved.

Inmaculada

Construction at the Inmaculada site continued into its final stages in the first half of the year with the result that commercial production was declared in August following a near faultless ramp-up period. All key metrics including tonnage, grades and recoveries proved to be in line with or above expectations and although there was a disagreement with our plant contractor over construction delays and a number of submitted change orders, the dispute was resolved amicably and in the final few months of the year, the mine delivered on its world class promise. Production for the year beat the higher end of our forecast range and Inmaculada's all-in sustaining cost per silver equivalent ounce for 2015 was at a very competitive $7.3 per ounce. We can now look forward to a full year of production at costs of between $9 to $10 per silver equivalent ounce which we believe will place the operation in the first quartile of the global cost curve and will ensure strong cashflow for the Company for the foreseeable future. We remain positive about the mine's expansion potential in the medium term and will begin a drill programme in the surrounding district in 2016.

Cost reduction

With commodity prices experiencing a third year of declines, Hochschild continued its cashflow optimisation programme in order to ensure that all our operations were mining profitable ounces and are cashflow positive. The mine plans at Arcata and Pallancata were revised with the focus placed on accessible ore areas requiring reduced capital expenditure and assuming stringent cut off grades. The effect of these measures was somewhat mitigated during the year as both operations delivered successful brownfield exploration programmes allowing additional higher grade tonnage to be processed at Arcata in particular. At Pallancata, the discovery of the Pablo vein in August delivered the prospect of a transition to significantly lower cost feed for the Selene plant with our team expecting to have initial production from the vein towards the end of 2016. Overall, we were able to reduce all-in sustaining costs by 26% versus 2014, which is strong evidence of the Company's ability to operate flexibly in a difficult industry environment. Furthermore, the positive developments in Argentina towards the end of the year indicate the potential to continue to move our operations down the cost curve.

Financial position

In a year when careful management of the balance sheet was crucial, in particular with respect to the completion of our Inmaculada project, we believe we have taken substantial steps in our aim of de-risking the Company. Forming the first part of our three pronged financial strategy, the smooth progress of the new mine's ramp-up to full production started to bear fruit in the final two quarters with the generation of strong cashflow from this low cost operation. Secondly, in October, we announced a $100 million rights issue, the success of which allowed us to begin the process of strengthening our balance sheet and by the end of the year we had already paid down just over $100 million of mid to long term debt. And thirdly, we supplemented this initiative throughout the year by taking advantage of short periods of price strength to hedge around 40% of our production to ensure a degree of cashflow stability. This prudent policy has continued with approximately half of our 2016 production also protected at around the current spot prices. With net debt significantly reduced versus our peak position at the half year and with the maturities of the remaining debt adequately profiled, the Company is in a substantially healthier financial position than at the end of 2014.

2015 overview

One of the most pleasing aspects of the Company's ongoing response to the industry downturn has been the strength of our operations. Once again we exceeded the production target for the year, delivering 27.0 million silver equivalent ounces with both San Jose and Arcata especially, recording better than expected production. Pallancata's performance reflects an operation in a transitional period until new low cost material from the Pablo vein is introduced towards the end of the year. However, when also considering Inmaculada's maiden contribution, we believe the flexibility of the Hochschild portfolio has been amply demonstrated.

The average price achieved once again fell in 2015, by 12% for silver and by almost 10% for gold and consequently our revenue was lower despite total production increasing by almost 12%. However, pleasingly pre-exceptional EBITDA rose by 2% to $139m reflecting the higher margin contribution from Inmaculada and solid cost control across our operations. The cashflow from the new mine is beginning to offset the finance costs arising from our bond issue in January 2014 to fund its construction but this still affected the underlying earnings. Pre-exceptional EPS was $(0.14) per share. The cash balance at the end of the year was $84 million with the fourth quarter debt repayment programme resulting in net debt of approximately $351 million.

Outlook

We expect that 2016 will mark the fourth year of increasing production and reducing costs. Attributable production for the Company is expected to rise to 32.0 million silver equivalent ounces (assuming the average silver to gold ratio for 2015 of 74:1), boosted by the first full year of output from Inmaculada. The all-in sustaining cost per silver equivalent ounce is expected to once again be reduced to between $12.0 to $12.5 which includes almost 14 million ounces of production from Inmaculada at between $9 to $10 per silver equivalent ounce. The focus of our capital expenditure budget of approximately $100 million will be on sustaining and development expenditure for our current mines but included is also an allocation of approximately $10 million for the development of the Pablo vein - a project which initial Company economics estimate has a net asset value of approximately $40 million.

The recent regulatory and economic policy changes in Argentina also offer a promising future for our high grade San Jose mine. Changes including the significant devaluation of the Argentine peso and the new government's cancellation of the export taxes along with management's solid operational track record now place the mine in a good position to improve its cashflow contribution.

2015 has been a year of transformation for the Company. Whilst the industry downturn has necessitated a continued strong focus on cost efficiency, we are extremely encouraged by the positive attitude displayed by all our employees. We have entered 2016 with a renewed sense of confidence: a fourth consecutive year of production increases and reduced costs; a new mine; renewed resources at Arcata and Pallancata; a stronger balance sheet; and several brownfield exploration targets with the potential to continue improving the quality and quantity of our existing resources.

Ignacio Bustamante, Chief Executive Officer

8 March 2016

OPERATING REVIEW

OPERATIONS

Note: silver/gold equivalent production figures assume the average gold/silver ratio for 2015 of 74:1.

Production

In 2015, Hochschild once again exceeded its full year production target, delivering attributable production of 27.0 million silver equivalent ounces (24.7 million ounces using the Company's previous gold/silver ratio of 60:1), including 14.8 million ounces of silver and 166 thousand ounces of gold. The overall production target for 2016 is 32.0 million silver equivalent ounces, assuming the average silver-to-gold ratio for 2015, which consists of just over 14 million ounces from Inmaculada, approximately 7 million attributable ounces from the 51% owned San Jose and the balance from the remaining two Peruvian operations. 2016 production is expected to be equally weighted between gold and silver.

Costs

The Company's all-in sustaining cost was reduced by 26% in 2015 to $12.9 per silver equivalent ounce driven by Inmaculada with a very competitive $7.3 per silver equivalent ounce⁶. Operational initiatives (cashflow optimisation programme), devaluation of local currencies and grade improvements at all operating units also contributed to the reduction. Please see page 12 of the Financial Review for further details on costs.

The all-in sustaining cost per silver equivalent ounce in 2016 is now expected to be between $12.0 and $12.5 with Inmaculada costs forecast to be between $9 and $10 per ounce, the remaining Peruvian mines at approximately $14.5 per ounce and San Jose at approximately $13 per ounce although ongoing Argentinean peso devaluation and a series of tax cancellations may reduce the target further.

Inmaculada (Peru)

The 100% owned Inmaculada underground operation is located in the Department of Ayacucho in southern Peru. It commenced production in June 2015.

Inmaculada summary	Year ended 31 Dec 2015
Ore production (tonnes)	659,737
Average silver grade (g/t)	115
Average gold grade (g/t)	4.36
Silver produced (koz)	2,055
Gold produced (koz)	84.64
Silver equivalent produced (koz)	8,318
Silver sold (koz)	1,638
Gold sold (koz)	67.51
Unit cost ($/t)	63.3
Total cash cost ($/oz Ag co-product)⁷	4.6
All-in sustaining cost ($/oz)	7.3

Production

Commercial production was declared at the new flagship mine in August 2015 and the Company subsequently announced on 22 September that it had received the final mill operating permit from the Peruvian government with sales of dore commencing soon afterwards. Overall production in 2015 improved on the targeted range, coming in at 8.3 million silver equivalent ounces consisting of 84.6 thousand ounces of gold and 2.1 million ounces of silver. This was primarily driven by solid gold and silver grades and increased tonnage as the processing plant operated at closer to 3,850 tonnes per day during the last quarter of the year compared to its design capacity of 3,500 tonnes per day.

Costs

The all-in sustaining costs were low at $7.3 per silver equivalent ounce. This was driven by better than expected extraction costs, operational efficiencies versus the plan and by the processing of the significant ore stockpile which incurred a low cost in the plant's ramp-up phase and increased tonnage overall when mining operations commenced. The original cost of mining this stockpile was capitalised over the previous few periods. Overall all-in sustaining costs are expected to increase to the normalised forecast level of between $9 to $10 in 2016.

Brownfield exploration

In 2016, a geological mapping programme is planned for the Inmacualda and Hualhua areas along with a 7,000 metre drilling programme in the Palca zone.

Arcata (Peru)

The 100% owned Arcata underground operation is located in the Department of Arequipa in southern Peru. It commenced production in 1964.

Arcata summary	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Ore production (tonnes)	648,051	701,947	(8)
Average silver grade (g/t)	323	286	13
Average gold grade (g/t)	0.99	0.85	16
Silver produced (koz)	5,613	5,827	(4)
Gold produced (koz)	15.67	16.89	(7)
Silver equivalent produced (koz)	6,772	7,077	(4)
Silver sold (koz)	5,653	5,621	1
Gold sold (koz)	15.29	15.66	(2)
Unit cost ($/t)	109.1	89.1	22
Total cash cost ($/oz Ag co-product)	11.7	12.6	(7)
All-in sustaining cost ($/oz)	14.3	17.7	(19)

Production

At Arcata, total silver equivalent production for 2015 was 6.8 million ounces (2014: 7.1 million ounces). Despite introducing an adjusted mine plan at the start of 2015 to ensure the extraction of profitable ounces, Arcata has delivered a much stronger year than expected. A successful brownfield exploration programme has ensured considerable tonnage at higher silver grades than expected.

Costs

In 2015, all-in sustaining costs fell by 19% to $14.3 per silver equivalent ounce (2014: $17.7 per ounce) due to a substantial decline in capital expenditure resulting from the announced adjusted mine plan as well as improved grades.

Brownfield exploration

During 2015, the Arcata exploration programme has focused on the incorporation of resources from the Stephani, Cristina, Soledad, Macarena and Nicole veins as well as further exploration of the Tunels 3 and 4 vein systems. Just over 10,000 metres of drilling were executed. Significant intercepts included:

Vein	Results
North-South	DDH027-LM11: 2.12m @ 0.43 g/t Au & 719 g/t Ag DDH768-LM14: 1.27m @ 2.46 g/t Au & 549 g/t Ag DDH802-GE15: 1.58m @ 0.56 g/t Au & 659 g/t Ag DDH990-GE11: 0.82m @ 0.15 g/t Au & 1,667 g/t Ag
Lucero	DDH777-LM15: 1.35m @ 1.35 g/t Au & 593 g/t Ag DDH792-GE15: 1.01m @ 1.85 g/t Au & 395 g/t Ag DDH800-LM15: 0.97m @ 1.49 g/t Au & 533 g/t Ag
Soledad	DDH800-LM15: 1.00m @ 4.05 g/t Au & 1,015 g/t Ag
Tunel 3	DDH871-GE15: 1.2m @1.04 g/t Au & 1,135 g/t Ag DDH872-GE15: 1.3m @2.09 g/t Au & 1,196 g/t Ag
Tunel 4	DDH878-GE15: 1.0m @ 2.4 g/t Au & 3,479 g/t Ag DDH883-GE15: 1.7m @ 1.6 g/t Au & 1,729 g/t Ag

The focus of 2016 will be a 7,000 metre drilling programme to incorporate additional resources from the Tunel 4, Marion and Alexia veins.

Pallancata (Peru)

The 100% owned Pallancata silver/gold property is located in the Department of Ayacucho in southern Peru, approximately 160 kilometres from the Arcata operation. Pallancata commenced production in 2007. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

Pallancata summary	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Ore production (tonnes)	522,431	1,051,068	(50)
Average silver grade (g/t)	259	238	9
Average gold grade (g/t)	1.28	1.03	24
Silver produced (koz)	3,664	6,527	(44)
Gold produced (koz)	16.42	24.34	(33)
Silver equivalent produced (koz)	4,879	8,329	(41)
Silver sold (koz)	3,632	6,502	(44)
Gold sold (koz)	15.80	24.03	(34)
Unit cost ($/t)	98.9	69.3	43
Total cash cost ($/oz Ag co-product)	12.5	11.0	14
All-in sustaining cost ($/oz)	15.7	16.7	(6)

Production

At Pallancata, total production for the year was 4.9 million silver equivalent ounces (2014: 8.3 million ounces). Tonnage throughout the year was significantly lower than 2014 due to the adjusted mine plan's approximate halving of capacity although silver and gold grades rose gradually throughout the year to partially compensate. The operation remains in a transitional phase with the Selene plant expected to transition to the new Pablo vein later in 2016. See further details of the Pablo vein below.

Costs

All-in sustaining costs fell by 6% to $15.7 per silver equivalent ounce (2014: $16.7 per ounce) due to the scheduled decline in capex as well as better grades. These improvements were partially offset by incremental capex approved to develop the newly discovered Pablo vein. See details below of the Pablo vein's preliminary economics.

Brownfield exploration

The exploration team at Pallancata began a 19,100 metre exploration and drilling programme in May 2015 with the aim of focusing on inferred resource exploration at surface. In mid August, whilst pursuing the west extension of the Yurika vein to the north west of the main Pallancata vein, a new blind structure at a depth of 200 metres below surface was discovered. The Pablo vein has been recognised along an east-west strike for 700 metres and dips 50-75° south. The structure's significant thickness (greater than 10m wide) is associated with dilation zones in flexures and fault jogs. The Pablo vein is a fine-to-medium grain white quartz vein and shows a banded texture and multiple brecciation events filled with adularia and quartz crystals. It is part of a major regional structure, currently extending to about 2 km, which will be explored over the medium term.

Following the initial discovery of the Pablo vein, drilling continued and an initial inferred resource was achieved. The Company's preliminary economics for a two year mine life for the Pablo vein are detailed below. Resources (unaudited) are estimates based on a cut-off grade of 103g/t silver equivalent.

Pablo
Inferred resources (kt) (unaudited)	1,251
Ag grade (g/t)	344
Au grade (g/t)	1.3
LOM production (M oz Ag Eq)	12.6
LOM AISC ($/oz Ag Eq)	10.6

LOM Cashflows ($m)
Revenue	161.4
Costs	(108.5)
Selling expenses	(3.0)
Capital expenditure	(19.7)
Taxes (SMT & Royalties)	(2.4)
Pre-tax total	27.9
NAV @5% (spot metal prices)(illustrative)	40.5

Spot metal prices: $15.5/oz Ag; $1,230/oz Au

Work has started on mine development to access the vein and the Company currently expects to have initial production from Pablo towards the end of 2016.

Drilling has continued at the deposit and 7,242 metres were drilled at Pablo and Yurika veins during the last quarter of the year. Preliminary results are below:

Vein	Results
Pablo	DLEP-A21: 9.0m @0.68 g/t Au & 225 g/t Ag DLEP-A23: 7.1m @1.09 g/t Au & 389 g/t Ag DLEP-A24: 2.9m @1.34 g/t Au & 334 g/t Ag DLEP-A25: 9.0m @1.20 g/t Au & 324 g/t Ag DLEP-A26: 4.7m @0.73 g/t Au & 290 g/t Ag
Yurika	DLYU-A97: 2.8m @1.66 g/t Au & 438 g/t Ag
Yurika ceiling	DLYU-A97: 1.5m @ 3.94 g/t Au & 748 g/t Ag DLYU-A99: 1.0m @ 0.89 g/t Au & 231 g/t Ag

The focus of the brownfield exploration programme for 2016 will be a 5,500 metre drilling programme to add resources in from the Pablo and Yurica veins. Geological mapping of the Pallancata-Selene area will also be carried out.

San Jose: Argentina

The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750 kilometres south-southwest of Buenos Aires. San Jose commenced production in 2007 and is a joint venture with McEwen Mining Inc. Hochschild holds a controlling interest of 51% in the mine and is the mine operator.

San Jose summary^*	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Ore production (tonnes)	532,488	571,017	(7)
Average silver grade (g/t)	448	404	11
Average gold grade (g/t)	6.36	5.77	10
Silver produced (koz)	6,706	6,469	4
Gold produced (koz)	96.64	94.16	3
Silver equivalent produced (koz)	13,857	13,437	3
Silver sold (koz)	6,340	6,316	-
Gold sold (koz)	88.79	91.28	(3)
Unit cost ($/t)	210.4	197.8	6
Total cash cost ($/oz Ag co-product)	10.8	12.1	(11)
All-in sustaining cost ($/oz)	14.1	17.8	(21)

^*The Company has a 51% interest in San Jose

Production

The San Jose operation once again delivered another consistent year with operation producing a record 13.9 million silver equivalent ounces (2014: 13.4 million ounces) driven by better than projected silver and gold grades.

On 17 December 2015, the Argentinean peso fell by approximately 40% against the dollar following the decision by the government to lift capital controls. With approximately 70% of operating costs at San Jose incurred in pesos, the effect of this significant devaluation is already having a material impact on the mine's cost position.

The Argentinean government published a decree on 2 November 2015 restoring the right to receive a rebate from goods exported through Patagonian ports (previously cancelled in 2009). This benefit is applicable to Hochschild at a rate of approximately 9% of the FOB value of its exports which amounts to approximately $15 million per annum. The current estimate for collection is approximately two years.

In late December 2015, following an announcement by the new government that they would remove export taxes on agricultural and industrial products, it was subsequently confirmed that the decree included removal of the 5% export tax on finished mining products such as dore (approximately 50% of the mine's output). Subsequently in 2016 it was confirmed that the additional 10% export tax on concentrate would also be removed from February 2016.

Finally it was also confirmed recently that the 1% tax on the market value of reserves that was imposed by the Province of Santa Cruz in 2013 has been removed with the resulting positive effect amounting to approximately $3 million per annum.

The effect of all the above-mentioned changes in Argentina is that the Company expects overall economic and operating environment in Argentina to improve significantly.

Costs

At San Jose, unit cost per tonne increased by 6% versus 2014 to $210.4. However, all-in sustaining costs were reduced by 21% to $14.1 per silver equivalent ounce (2014: $17.8 per ounce) driven by cost reduction initiatives, lower capex and better grades.

Brownfield exploration

Whilst no drilling was carried out in 2015, a 3,500 metre programme is planned for 2016 in the Los Pinos and Colorado Grande areas as well as a comprehensive mapping programme of other areas such as Agua Vivas to the South of the mine.

PROJECT REVIEW

Hochschild's portfolio currently includes three Growth Projects, Crespo, Azuca and Volcan. The continuing weakness of the precious metal markets during 2015, following the initial price declines in 2013, led to the focus on completing construction of Hochschild's flagship Inmaculada project.

The strategy with regards to Crespo, Azuca and Volcan was revised in late 2013 with work on these deposits remaining on hold throughout 2014 and 2015. Despite the above-mentioned prioritisation of Inmaculada, all three projects remain an important component of the company's portfolio of development assets. It is management's intention that in the event that precious metals markets show sustained improvement, this would allow the Company to assess capital re-allocation to these assets and potentially re-initiate development.

Inmaculada

During the first half of 2015, construction of the plant continued with first dore production achieved on 3 June 2015. The ramp-up phase was ongoing throughout the third quarter with tonnes per day reaching the forecast capacity of 3,500 in mid August and operating at just above that level for the remainder of the year. Gold and silver recoveries trended to close to their target of 93.7% in gold and 87.9% in silver.

The Hochschild team also continued underground mine development throughout the first half and a stockpile of approximately 270,000 tonnes began to be processed following commissioning of the plant whilst stope mining activities (utilising long hole and breasting methods) were being initiated. Following the declaration of commercial production at the mine in August, the Company subsequently announced on 22 September that it had received the final mill operating permit from the Peruvian government and consequently sales of dore were able to commence.

Construction of the paste backfill plant also continued throughout the year with the mine's laboratories, warehouses and workshops also completed.

During the year, the contractor Graña y Montero (GyM), made a number of requests for additional costs from the Company under the Engineering, Procurement and Construction Contract ("EPC"). In addition, Hochschild made certain claims against GyM as a result of delays in the construction of the plant and related components of the project. In September, following discussions, the Company and GyM settled their mutual claims and agreed that the total amount payable by the Company to GyM for all works under the EPC Contract (including pending work) would be fixed at approximately $159.1 million, of which $20 million represented additional amounts payable in settlement of all claims made by GyM for additional costs under the EPC Contract. In addition, it was agreed that GyM would bear all risks and costs resulting from the completion of all pending work under the EPC Contract and, therefore, subject to certain limited exceptions, GyM would not be entitled to request further adjustments to the amounts agreed to be paid.

To date Hochschild has paid to GyM approximately $136 million under the EPC Contract. It was agreed that the above mentioned amount of $20 million would be paid in four instalments every six months starting in September 2017, with interest accruing at an annual rate of 5% of the outstanding balance. The remaining approximately $4 million will be paid following completion of the outstanding work.

Total construction capital expenditure for the Inmaculada mine was $455 million, of which $449 million has already been incurred by the end of the year with the remaining construction capital expenditure of $6 million expected to be spent during 2016 (to be funded from existing cash resources).

FINANCIAL REVIEW

The reporting currency of Hochschild Mining plc is U.S. dollars. In discussions of financial performance the Group removes the effect of exceptional items, unless otherwise indicated, and in the income statement results are shown both pre and post such exceptional items. Exceptional items are those items, which due to their nature or the expected infrequency of the events giving rise to them, need to be disclosed separately on the face of the income statement to enable a better understanding of the financial performance of the Group and to facilitate comparison with prior years.

Revenue

Gross revenue

Gross revenue from continuing operations decreased by 5% to $469.2 million in 2015 (2014: $493.0 million) primarily driven by another substantial fall in precious metal prices.

Silver

Gross revenue from silver decreased 23% in 2015 to $275.3 million (2014: $358.2 million) as a result of lower prices as well as a 9% decrease in the total amount of silver ounces sold to 17,263 koz (2014:18,981 koz) driven by the fall in ounces produced from Pallancata due to the imposition of the adjusted mine plan.

Gold

Gross revenue from gold increased 19% in 2015 to $217.2 million (2014: $182.7 million) as a result of a 31% rise in the total amount of gold ounces sold in 2015 (187.4 koz) offsetting the 9% fall in the average price received. The increase in gold sales came from the first output from the new Inmaculada operation.

Gross average realised sales prices

The following table provides figures for average realised prices (which are reported before the deduction of commercial discounts and include the effects of the existing hedging agreements) and ounces sold for 2015 and 2014:

Average realised prices	Year ended 31 Dec 2015	Year ended 31 Dec 2014
Silver ounces sold (koz)	17,263	18,981
Avg. realised silver price ($/oz)	16.0	18.9
Gold ounces sold (koz)	187.39	142.77
Avg. realised gold price ($/oz)	1,159	1,279

Commercial discounts

Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrates, and are deducted from gross revenue on a per tonne basis (treatment charge), per ounce basis (refining fees) or as a percentage of gross revenue (payable deductions). In 2015, the Group recorded commercial discounts of $23.6 million (2014: $48.1 million). This decrease is explained by the decision to switch the majority of production from Arcata back to dore in 2015 as opposed to the previous year when most was sold as concentrate due to favourable commercial terms. The ratio of commercial discounts to gross revenue in 2015 decreased to 5% (2014: 9%).

Net revenue

Net revenue decreased by 5% to $469.1 million (2014: $493.0 million), comprising silver revenue of $258.4 million and gold revenue of $210.5 million. In 2015 silver accounted for 55% and gold 45% of the Company's consolidated net revenue with a 10 percentage point change from 2014 due to commencement of contributions from the Inmaculada mine.

Revenue by mine

$000 unless otherwise indicated	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Silver revenue
Arcata	93,445	103,963	(10)
Ares	-	10,896	-
Inmaculada	25,223	-	-
Pallancata	59,803	129,042	(54)
San Jose	96,837	114,276	(15)
Moris	-	30	-
Commercial discounts	(16,929)	(37,369)	(55)
Net silver revenue	258,379	320,838	(19)
Gold revenue
Arcata	19,124	20,040	(5)
Ares	-	14,993	-
Inmaculada	77,080	-	-
Pallancata	19,929	31,984	(38)
San Jose	101,046	115,211	(12)
Moris	-	441	-
Commercial discounts	(6,688)	(10,713)	(38)
Net gold revenue	210,491	171,956	22
Other revenue⁸	276	157	76
Net revenue	469,146	492,951	(5)

Costs

Total pre-exceptional cost of sales was steady at $403.7 million in 2015 (2014: $404.6 million). The direct production cost was flat at $265.1 million (2014: $265.6 million) with the positive effects of Inmaculada's lower costs offsetting the additional production delivered. Depreciation in 2015 was $139.5 million (2014: $126.0 million) with the increase mainly due to Inmaculada capex depreciation. Other items, which principally include the costs associated with stoppages in Argentina, was $9.3 million in 2015 (2014: $4.4 million). Change in inventories was $10.3 million in 2015 (2014: $8.6 million).

$000	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% Change
Direct production cost excluding depreciation	265,107	265,637	-
Depreciation in production cost	139,533	125,955	11
Other items	9,272	4,406	110
Change in inventories	(10,255)	8,641	(219)
Pre-exceptional cost of sales	403,657	404,639	-

Unit cost per tonne

The Company reported unit cost per tonne at its main operations of $118.4 in 2015, slightly up on 2014 (2014: $106.6). For further explanation on the increase in unit cost per tonne please refer to page 6 of the Operating Review.

Unit cost per tonne by operation (including royalties)⁹:

Operating unit ($/tonne)	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Peru	90.7	77.3	17
Arcata	109.1	89.1	22
Inmaculada	63.3	-	-
Pallancata	98.9	69.3	43
Argentina
San Jose	210.4	197.8	6
Others
Ares	-	119.3	-
Total	118.4	107.4	10

Cash costs

Cash costs include cost of sales, commercial deductions and selling expenses before exceptional items, less depreciation included in cost of sales.

Cash cost reconciliation¹⁰:

$000 unless otherwise indicated	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Group cash cost	313,939	353,736	(11)
(+) Cost of sales	403,657	404,639	-
(-) Depreciation and amortisation in cost of sales	(135,645)	(128,480)	(5)
(+) Selling expenses	21,729	28,697	(24)
(+) Commercial deductions	24,198	48,880	(50)
Gold	6,714	10,752	(38)
Silver	17,484	38,128	(54)
Revenue	469,146	492,951	(5)
Gold	210,491	171,956	22
Silver	258,379	320,838	(19)
Others	276	157	76
Ounces Sold
Gold	187.4	142.8	31
Silver	17,263	18,981	(9)
Group Cash Cost ($/oz)
Co product Au	752	865	(13)
Co product Ag	10.0	12.1	(17)
By product Au	203	(37)	648
By product Ag	5.6	9.0	(38)

Cash costs are calculated based on pre-exceptional figures. Co-product cash cost per ounce is the cash cost allocated to the primary metal (allocation based on proportion of revenue), divided by the ounces sold of the primary metal. By-product cash cost per ounce is the total cash cost minus revenue and commercial discounts of the by-product divided by the ounces sold of the primary metal.

All-in sustaining cost reconciliation

All-in sustaining cash costs per silver equivalent ounce¹¹

Year ended 31 Dec 2015

$000 unless otherwise indicated	Arcata	Inmac	Pallancata	San José	Main operations	Other operations	Corporate & others	Total
(+) Production cost excluding depreciation	71,128	32,765	51,599	108,101	263,593	-	-	263,593
(+) Other items in cost of sales	2,133	1,544	1,610	5,499	10,786	-	-	10,786
(+) Operating and exploration capex for units	14,600	13,704	10,683	38,451	77,438	-	1,193	78,631
(+) Brownfield exploration expenses	62	6	2,457	1,463	3,988	-	1,990	5,978
(+) Administrative expenses (excl depreciation and before exceptional items)	2,641	2,515	1,796	7,095	14,046	-	22,569	36,614
(+) Royalties	-	1,037	741	-	1,778	-	-	1,778
Sub-Total	90,564	51,571	68,885	160,609	371,629	-	25,751	397,380
Au Ounces produced	15,670	72,226	16,419	96,638	200,953	-	-	200,953
Ag Ounces produced (000s)	5,613	1,746	3,664	6,706	17,728	-	-	17,728
Ounces produced (Ag Eq oz)	6,772	7,090	4,879	13,857	32,599	-	-	32,599
Sub-total ($/oz)	13.4	7.3	14.1	11.6	11.4	-	-	12.2
(+) Commercial deductions	5,144	4	6,687	12,363	24,198	-	-	24,198
(+) Selling expenses	962	12	1,048	19,707	21,729	-	-	21,729
Sub-total	6,106	16	7,735	32,070	45,927	-	-	45,927
Au Ounces sold	15,289	67,513	15,795	88,793	187,390	-	-	187,390
Ag Ounces sold (000s)	5,653	1,638	3,632	6,340	17,263	-	-	17,263
Ounces sold (Ag Eq oz)	6,784	6,634	4,801	12,910	31,130	-	-	31,130
Sub-total ($/oz)	0.9	-	1.6	2.5	1.5	-	-	1.5
All-in sustaining costs ($/oz Ag Eq)	14.3	7.3	15.7	14.1	12.9	-	-	13.7

Year ended 31 Dec 2014

$000 unless otherwise indicated	Arcata	Inmac	Pallancata	San José	Main operations	Other operations	Corporate & others	Total
(+) Production cost excluding depreciation	62,644	-	71,742	110,089	244,475	17,853	-	262,328
(+) Other items in cost of sales	1,301	-	834	1,724	3,859	546	-	4,406
(+) Operating and exploration capex for units	28,867	-	34,657	51,350	114,874		1,613	116,487
(+) Brownfield exploration expenses	2,038	-	1,728	1,003	4,769	42	3,232	8,043
(+) Administrative expenses (excl depreciation and before exceptional items)	5,266	-	7,317	8,270	20,853	362	20,049	41,263
(+) Royalties	-	-	1,370	-	1,370	241	-	1,611
Sub-Total	100,116	-	117,648	172,436	390,200	19,044	24,894	434,138
Au Ounces produced	16,892	-	24,345	94,161	135,398	11,633	-	147,031
Ag Ounces produced (000s)	5,827	-	6,527	6,469	26,947	534	-	19,357
Ounces produced (Ag Eq oz)	6,841	-	7,988	12,119	26,947	1,232	-	28,179
Sub-total ($/oz)	14.6	-	14.7	14.2	14.5	15.5	-	15.4
(+) Commercial deductions	18,016	-	13,666	17,198	48,880	-	-	48,880
(+) Selling expenses	1,987	-	1,995	24,648	28,630	67	-	28,697
Sub-total	20,003	-	15,661	41,846	77,510	67	-	77,577
Au Ounces sold	15,663	-	24,025	91,277	130,965	11,449	-	142,770
Ag Ounces sold (000s)	5,621	-	6,502	6.316	18,439	540	-	18,981
Ounces sold (Ag Eq oz)	6,560	-	7,944	11,793	26,297	1,250	-	27,547
Sub-total ($/oz)	3.0	-	2.0	3.5	2.9	0.1	-	2.8
All-in sustaining costs ($/oz Ag Eq)	17.7	-	16.7	17.8	17.4	15.5	-	18.2

Administrative expenses

Administrative expenses before exceptional items decreased by 12% to $38.1 million (2014: $43.3 million) primarily due to the continuing impact of the cashflow optimisation programme.

Exploration expenses

In 2015, pre-exceptional exploration expenses, decreased by 46% to $9.3 million (2014: $17.3 million). In addition, the Group capitalises part of its brownfield exploration, which mostly relates to costs incurred converting potential resource to the Inferred or Measured and Indicated category. In 2015, the Company capitalised $2.6 million relating to brownfield exploration compared to $1.5 million in 2014, bringing the total investment in exploration for 2015 to $11.8 million (2014: $18.8 million).

Selling expenses

Selling expenses decreased by 24% versus 2014 at $21.7 million (2014: $28.7 million) mainly due to lower prices impacting the export taxes in Argentina and the decision to switch the majority of production from Arcata back to dore. Selling expenses in 2015 consisted of export duties at San Jose (export duties in Argentina were previously levied at 10% of revenue for concentrate and 5% of revenue for dore) and logistic costs for the sale of concentrate.

Other income/expenses

Other income before exceptional items was $8.0 million (2014: $4.1 million) mainly due to incremental revenue from logistic services provided to third parties and an export credit from dore bars in Argentina. Other expenses before exceptional items reached $15.3 million (2014: $17.5 million) mainly due to an increase in mine closure provisions of $7.6 million ($2014: $9.1 million).

Adjusted EBITDA

Adjusted EBITDA increased by 2% over the period to $138.8 million (2014: $135.6 million) driven primarily by the positive effects of the new low cost Inmaculada contribution but largely offset by significantly lower precious metal prices.

Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus non-cash items (depreciation and changes in mine closure provisions) and exploration expenses other than personnel and other exploration related fixed expenses.

$000 unless otherwise indicated	Year ended 31 Dec 2015	Year ended 31 Dec 2014	% change
Profit from continuing operations before exceptional items, net finance cost, foreign exchange loss and income tax	(10,886)	(14,374)	24
Depreciation and amortisation in cost of sales	135,645	128,480	6
Depreciation and amortisation in administrative expenses	1,534	2,072	(26)
Exploration expenses	9,255	17,254	(46)
Personnel and other exploration related fixed expenses	(4,301)	(6,934)	38
Other non cash expenses¹²	7,590	9,088	(16)
Adjusted EBITDA	138,837	135,586	2
Adjusted EBITDA margin	30%	28%

Finance income

Finance income before exceptional items of $1.9 million reduced slightly from 2014 ($2.2 million) mainly due to lower interest received on deposits, partially offset by income generated from the repurchase of bonds below par value.

Finance costs

Finance costs before exceptional items decreased from $33.1 million in 2014 to $31.4 million in 2015, principally due to the repurchase of $55.2 million of Senior Notes with a coupon rate of 7.75% and the $50.0 million prepayment of the medium term loan, both in the fourth quarter.

Foreign exchange losses

The Group recognised a foreign exchange loss of $5.6 million (2014: $5.0 million loss) as a result of exposures in currencies other than the functional currency specifically the Peruvian Nuevo Sol and Argentinean Peso, both of which depreciated in the year against the US Dollar.

Income tax

The Company's pre-exceptional income tax charge was $20.4 million (2014: $6.5 million). The increase is mainly explained by the impact of local currency devaluation in Peru and Argentina which significantly reduced the tax basis of PP&E and therefore generating a deferred tax liability.

Exceptional items

Exceptional items in 2015 totalled $(173.3) million losses after tax (2014: $(14.1) million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $36.9 million (2014: $3.8 million).

2015 negative exceptional items:

Main items	$000	Description of main items
Cost of sales	(1,514)	Termination benefits
Impairment and write-off of non-financial assets (net)	(207,146)	Impairment of: Arcata unit ($72.4 million); Volcan unit ($57.1 million); Pallancata unit ($39.0 million); Crespo project ($14.4 million); Azuca project ($12.8 million); San Felipe project ($10.9 million); PP&E write-off ($0.6 million)
Finance cost	(1,486)	Interest on disputed tax charge

Cash flow & balance sheet review

Cash flow:

$000 unless otherwise indicated	Year ended 31 Dec 2015	Year ended 31 Dec 2014	Change
Net cash generated from operating activities	133,256	93,779	39,477
Net cash used in investing activities	(223,319)	(263,007)	39,668
Cash flows generated in financing activities	61,027	5,039	55,988
Net decrease in cash and cash equivalents during the period	(29,036)	(164,189)	(135,153)

Operating cash flow increased from $93.8 million in 2014 to $133.3 million in 2015, mainly due to the maiden cash contribution from the new Inmaculada mine, partially offset by lower prices. Net cash used in investing activities decreased to $(223.3) million in 2015 from $(263.0) million in 2014 mainly due to moderately lower pre-operating capex incurred at the Inmaculada project in 2015 as well as reduced sustaining capex at the other operations. Finally, cash generated from financing activities increased to $61.0 million from $5.0 million in 2014, primarily as a result of the proceeds from the equity rights issue and short term debt raised in Peru ($75 million) offset by the significant repayment of $105 million of debt in the second half of the year. As a result, total cash outflow decreased from $(164.2) million in 2014 to $(29.0) million in 2015 ($135.2 million difference).

Working capital

$000 unless otherwise indicated	Year ended 31 Dec 2015	Year ended 31 Dec 2014
Trade and other receivables	135,014	173,526
Inventories	70,286	58,417
Net other financial assets	20,126	2,809
Net income tax receivable	17,628	20,467
Trade and other payables and provisions	(249,788)	(226,603)
Working capital	(6,734)	28,616

The Group's working capital position improved by $35.4 million to $(6.7) million in 2015 from $28.6 million in 2014. This was primarily explained by: lower trade and other receivables ($(38.5) million) due to higher proportion of dore sales (lower collection period) at Arcata and lower prices; and higher trade and other payables and provisions ($(23.2) million), in line with improved payment terms obtained from vendors. These effects were partially offset by higher net financial assets ($17.4 million) and by higher inventories ($11.9 million), mainly resulting from accumulation of concentrate in Argentina in December 2015.

Net debt

$000 unless otherwise indicated	Year ended 31 Dec 2015	Year ended 31 Dec 2014
Cash and cash equivalents	84,017	115,999
Long term borrowings	(339,778)	(440,834)
Short term borrowings¹³	(94,760)	(27,882)
Net debt	(350,521)	(352,717)

The Group reported net debt position was $350.5 million as at 31 December 2015 (2014: ($352.7) million). The reduction includes the net effect of the equity rights issue ($95 million), the prepayment of the Scotiabank medium term loan (($50) million), the repurchase of senior notes (($55) million), the withdrawal of short term pre-shipment loans in Peru ($75 million) and the cash outflow required to complete the construction of Inmaculada.

Capital expenditure¹⁴

$000 unless otherwise indicated	Year ended 31 Dec 2015	Year ended 31 Dec 2014
Arcata	14,600	28,867
Ares	25	-
Selene	139	497
Pallancata	10,683	34,160
San Jose	38,451	51,350
Moris	-	-
Operations	63,898	114,874
Inmaculada	166,336	198,112
Crespo	2,842	4,206
Volcan	958	1,463
Azuca	211	853
Other	3,914	1,613
Total	238,159	321,121

2015 capital expenditure of $238.2 million (2014: $321.1 million) mainly comprised of operational capex of $63.9 million (2014: $114.9 million) and Inmaculada capital expenditure of $166.3 million (2014: $198.1 million).

Forward looking Statements

This announcement contains certain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, such forward looking statements may relate to matters such as the business, strategy, investments, production, major projects and their contribution to expected production and other plans of Hochschild Mining plc and its current goals, assumptions and expectations relating to its future financial condition, performance and results.

Forward-looking statements include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results, performance or achievements of Hochschild Mining plc may be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Factors that could cause or contribute to differences between the actual results, performance or achievements of Hochschild Mining plc and current expectations include, but are not limited to, legislative, fiscal and regulatory developments, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

The forward looking statements reflect knowledge and information available at the date of preparation of this announcement. Except as required by the Listing Rules and applicable law, Hochschild Mining plc does not undertake any obligation to update or change any forward looking statements to reflect events occurring after the date of this announcement. Nothing in this announcement should be construed as a profit forecast.

Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge:

- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

- the Management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2015

		Year ended 31 December 2015			Year ended 31 December 2014
	Notes	Before exceptional items US$000	Exceptional items (note 11) US$000	Total US$000	Before exceptional items US$000	Exceptional items (note 11) US$000	Total US$000
Continuing operations
Revenue	3,5	469,146	-	469,146	492,951	-	492,951
Cost of sales	6	(403,657)	(1,514)	(405,171)	(404,639)	(6,065)	(410,704)
Gross profit		65,489	(1,514)	63,975	88,312	(6,065)	82,247
Administrative expenses	7	(38,148)	-	(38,148)	(43,335)	(2,752)	(46,087)
Exploration expenses	8	(9,255)	-	(9,255)	(17,254)	(886)	(18,140)
Selling expenses	9	(21,729)	-	(21,729)	(28,697)	-	(28,697)
Other income	12	8,021	-	8,021	4,112	-	4,112
Other expenses	12	(15,264)	-	(15,264)	(17,512)	(2,963)	(20,475)
Impairment and write-off of assets, net	11	-	(207,146)	(207,146)	-	109	109
Loss from continuing operations before net finance income/(cost), foreign exchange loss and income tax		(10,886)	(208,660)	(219,546)	(14,374)	(12,557)	(26,931)
Finance income	13	1,898	-	1,898	2,215	4,061	6,276
Finance costs	13	(31,414)	(1,486)	(32,900)	(33,074)	(9,491)	(42,565)
Foreign exchange loss		(5,627)	-	(5,627)	(4,990)	-	(4,990)
Loss from continuing operations before income tax		(46,029)	(210,146)	(256,175)	(50,223)	(17,987)	(68,210)
Income tax (expense)/benefit	14	(20,370)	36,888	16,518	(6,466)	3,845	(2,621)
Loss for the year from continuing operations		(66,399)	(173,258)	(239,657)	(56,689)	(14,142)	(70,831)
Attributable to:
Equity shareholders of the Company		(61,852)	(172,758)	(234,610)	(54,963)	(13,914)	(68,877)
Non-controlling interests		(4,547)	(500)	(5,047)	(1,726)	(228)	(1,954)
		(66,399)	(173,258)	(239,657)	(56,689)	(14,142)	(70,831)
Basic and diluted loss per ordinary share from continuing operations for the year (expressed in US dollars per share)	15	(0.14)	(0.38)	(0.52)	(0.13)	(0.03)	(0.16)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

		Year ended 31 December
	Notes	2015 US$000	2014 US$000
Loss for the year		(239,657)	(70,831)
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Exchange differences on translating foreign operations		(597)	(1,716)
Change in fair value of available-for-sale financial assets	19	(86)	(3,106)
Recycling of the loss on available-for-sale financial assets		104	2,096
Change in fair value of cash flow hedges		35,887	18,945
Recycling of the gain on cash flow hedges		(18,962)	(14,603)
Deferred income tax relating to components of other comprehensive income	14	(4,739)	(1,216)
Other comprehensive gain for the period, net of tax		11,607	400
Total comprehensive expense for the year		(228,050)	(70,431)
Total comprehensive expense attributable to:
Equity shareholders of the Company		(223,003)	(68,477)
Non-controlling interests		(5,047)	(1,954)
		(228,050)	(70,431)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

	Notes	As at 31 December 2015 US$000	As at 31 December 2014 US$000
ASSETS
Non-current assets
Property, plant and equipment	16	1,045,516	1,076,310
Evaluation and exploration assets	17	138,171	207,290
Intangible assets	18	27,981	42,815
Available-for-sale financial assets	19	366	455
Trade and other receivables	20	10,187	6,488
Income tax receivable		47	-
Deferred income tax assets	27	-	1,574
		1,222,268	1,334,932
Current assets
Inventories	21	70,286	58,417
Trade and other receivables	20	124,827	167,038
Income tax receivable		20,384	25,584
Other financial assets		21,267	4,342
Cash and cash equivalents	22	84,017	115,999
		320,781	371,380
Total assets		1,543,049	1,706,312
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital		223,805	170,389
Share premium		438,041	396,021
Treasury shares		(898)	(898)
Other reserves		(203,649)	(217,335)
Retained earnings		218,093	451,047
		675,392	799,224
Non-controlling interests		90,113	95,160
Total equity		765,505	894,384
Non-current liabilities
Trade and other payables	24	20,379	92
Borrowings	25	339,778	440,834
Provisions	26	121,402	111,751
Deferred income	23	25,000	25,000
Deferred income tax liabilities	27	64,274	84,959
		570,833	662,636
Current liabilities
Trade and other payables	24	101,892	111,890
Other financial liabilities		1,141	1,533
Borrowings	25	94,760	27,882
Provisions	26	6,115	2,870
Income tax payable		2,803	5,117
		206,711	149,292
Total liabilities		777,544	811,928
Total equity and liabilities		1,543,049	1,706,312

These financial statements were approved by the Board of Directors on 8 March 2016 and signed on its behalf by:

Ignacio Bustamante

Chief Executive Officer

8 March 2016

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2015

		Year ended 31 December
	Notes	2015 US$000	2014 US$000
Cash flows from operating activities
Cash generated from operations		166,234	129,993
Interest received		726	1,931
Interest paid		(36,445)	(25,585)
Payment of mine closure costs	26	(2,538)	(5,524)
Income tax received/(paid)		5,279	(7,036)
Net cash generated from operating activities		133,256	93,779
Cash flows from investing activities
Purchase of property, plant and equipment		(216,188)	(309,033)
Purchase of evaluation and exploration assets		(6,861)	(6,071)
Purchase of intangibles		(612)	(281)
Dividends received		-	494
Proceeds from deferred income	23	-	3,223
Proceeds from sale of available-for-sale financial assets		3	48,097
Proceeds from sale of property, plant and equipment		339	564
Net cash used in investing activities		(223,319)	(263,007)
Cash flows from financing activities
Proceeds of borrowings		175,948	482,393
Repayment of borrowings		(209,173)	(458,132)
Transaction costs of borrowings		-	(9,166)
Dividends paid	28	(964)	(10,056)
Proceeds from issue of ordinary shares		95,216	-
Cash flows generated in financing activities		61,027	5,039
Net decrease in cash and cash equivalents during the year		(29,036)	(164,189)
Exchange difference		(2,946)	(6,247)
Cash and cash equivalents at beginning of year		115,999	286,435
Cash and cash equivalents at end of year	22	84,017	115,999

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year 31 December 2015

							Other reserves
	Notes	Equity share capital US$000	Share premium US$000	Treasury shares US$000	Unrealised gain/ (loss) on available-for-sale financial assets US$000	Unrealised gain/ (loss) on hedges US$000		Bond equity component (note 25(b)) US$000	Cumulative translation adjustment US$000	Merger reserve US$000	Share- based payment reserve US$000	Total Other reserves US$000	Retained earnings US$000	Capital and reserves attributable to shareholders of the Parent US$000	Non-controlling interests US$000	Total equity US$000
Balance at 1 January 2014		170,389	396,021	(898)	1,024	-		8,432	(11,289)	(210,046)	736	(211,143)	511,492	865,861	104,375	970,236
Other comprehensive (loss)/income		-	-	-	(1,010)	3,126		-	(1,716)	-	-	400	-	400	-	400
Loss for the year		-	-	-	-	-		-	-	-	-	-	(68,877)	(68,877)	(1,954)	(70,831)
Total comprehensive income/(loss) for the year		-	-	-	(1,010)	3,126		-	(1,716)	-	-	400	(68,877)	(68,477)	(1,954)	(70,431)
Transfer to retained earnings		-	-	-	-	-		(8,432)	-	-	-	(8,432)	8,432	-	-	-
CEO LTIP		-	-	-	-	-		-	-	-	610	610	-	610	-	610
Deferred bonus plan		-	-	-	-	-		-	-	-	1,230	1,230	-	1,230	-	1,230
Dividends declared to non-controlling interests	28	-	-	-	-	-		-	-	-	-	-	-	-	(7,261)	(7,261)
Balance at 31 December 2014		170,389	396,021	(898)	14	3,126		-	(13,005)	(210,046)	2,576	(217,335)	451,047	799,224	95,160	894,384
Other comprehensive (loss)/income		-	-	-	18	12,186		-	(597)	-	-	11,607	-	11,607	-	11,607
Loss for the year		-	-	-	-	-		-	-	-	-	-	(234,610)	(234,610)	(5,047)	(239,657)
Total comprehensive income/(loss) for the year		-	-	-	18	12,186		-	(597)	-	-	11,607	(234,610)	(223,003)	(5,047)	(228,050)
Issuance of shares of deferred bonus plan		220	-	-	-	-		-	-	-	(1,560)	(1,560)	1,340	-	-	-
Issuance of shares		53,196	46,812	-	-	-		-	-	-	-	-	-	100,008	-	100,008
Transaction costs related to issuance of shares		-	(4,792)	-	-	-		-	-	-	-	-	-	(4,792)	-	(4,792)
Restricted share plan		-	-	-	-	-		-	-	-	2,843	2,843	-	2,843	-	2,843
Deferred bonus plan		-	-	-	-	-		-	-	-	469	469	-	469	-	469
CEO LTIP		-	-	-	-	-		-	-	-	327	327	316	643	-	643
Balance at 31 December 2015		223,805	438,041	(898)	32	15,312		-	(13,602)	(210,046)	4,655	(203,649)	218,093	675,392	90,113	765,505

1 Notes to the consolidated financial statements

For the year ended 31 December 2015

The financial information for the year ended 31 December 2015 and 2014 contained in this document does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the years ended 31 December 2015 and 2014 have been extracted from the consolidated financial statements of Hochschild Mining plc for the year ended 31 December 2015 which have been approved by the directors on 8 March 2016 and will be delivered to the Registrar of Companies in due course. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2 Significant accounting policies

Changes in accounting policy and disclosures

The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statement for the year ended 31 December 2014.

Standards, interpretations and amendments to existing standards that are not yet effective and have not been previously adopted by the Group

Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2016 or later periods but which the Group has not previously adopted. Those that are applicable to the Group are as follows:

· IAS 1 Disclosure Initiative - Amendments to IAS 1, applicable for annual periods beginning on or after 1 January 2016.

· IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38, applicable for annual periods beginning on or after 1 January 2016.

· AIP IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - Changes in methods of disposal, applicable for annual periods beginning on or after 1 January 2016.

· AIP IFRS 7 Financial Instruments: Disclosures - Servicing contracts, applicable for annual periods beginning on or after 1 January 2016.

· AIP IAS 19 Employee Benefits - Discount rate: regional market issue, applicable for annual periods beginning on or after 1 January 2016.

· IFRS 15 Revenue from Contracts with Customers, applicable for annual periods beginning on or after 1 January 2018.

· IFRS 9 Financial Instruments, applicable for annual periods beginning on or after 1 January 2018.

· IFRS 12 Disclosure of Interests in Other Entities, applicable for annual periods beginning on or after 1 January 2016.

· IFRS 16 Leases, applicable for annual periods beginning on or after 1 Jan 2019.

· IAS 7 Statement of cash flows, applicable for annual periods beginning on or after 1 January 2017.

· IAS 12 Income Taxes, applicable for annual periods beginning on or after 1 January 2017.

The Group is analysing the effect of the standards and plans to adopt the new standard on the required effective date.

3 Segment reporting

The Group's activities are principally related to mining operations which involve the exploration, production and sale of gold and silver. Products are subject to the same risks and returns and are sold through the same distribution channels. The Group undertakes a number of activities solely to support mining operations including power generation and services. Transfer prices between segments are set on an arm's length basis in a manner similar to that used for third parties. Segment revenue, segment expense and segment results include transfers between segments at market prices. Those transfers are eliminated on consolidation.

For internal reporting purposes, management takes decisions and assesses the performance of the Group through consideration of the following reporting segments:

· Operating units - Arcata and San Jose, which generate revenue from the sale of gold, silver, dore and concentrate.

· Operating unit - Pallancata, which generates revenue from the sale of concentrate.

· Operating unit - Inmaculada, which will generate revenue from the sale of gold, silver and dore.

· Operating unit - Ares, in suspension, which generated revenue from the sale of gold and silver, disclosed as a segment until 31 December 2014. This operation did not meet the quantitative thresholds to be a separate reportable segment in 2015 and accordingly has been included in 'Other'. The comparative segment information has been restated to reflect these changes.

· Exploration, which explores and evaluates areas of interest in brownfield and greenfield sites with the aim of extending the life‑of‑mine of existing operations and to assess the feasibility of new mines. The exploration segment includes costs charged to the profit and loss and capitalised as assets.

· Other - includes the profit or loss generated by Empresa de Transmisión Callalli S.A.C. (a power transmission company), HMX, S.A. de C.V. (a service company in Mexico), Empresa de Transmisión Aymaraes S.A.C. (a power transmission company), Ares unit, Moris unit and the Selene plant (used to process some of the Group's production).

The Group's administration, financing, other activities (including other income and expense), and income taxes are managed at a corporate level and are not allocated to operating segments.

Segment information is consistent with the accounting policies adopted by the Group. Management evaluates the financial information based on International Financial Reporting Standards (IFRS) as adopted for use in the European Union.

The Group measures the performance of its operating units by the segment profit or loss that comprises gross profit, selling expenses and exploration expenses.

Segment assets include items that could be allocated directly to the segment.

(a) Reportable segment information

	Arcata US$000	Pallancata US$000	San Jose US$000	Inmaculada US$000	Exploration US$000	Other1 US$000	Adjustment and eliminations US$000	Total US$000
Year ended 31 December 2015
Revenue from external customers	107,425	73,045	186,097	102,303	-	276	-	469,146
Inter segment revenue	-	-	-	-	-	2,437	(2,437)	-
Total revenue	107,425	73,045	186,097	102,303	-	2,713	(2,437)	469,146

Segment profit/(loss)	(1,340)	(17,002)	13,297	49,759	(10,710)	384	(1,397)	32,991
Others2								(289,166)
Loss from continuing operations before income tax								(256,175)

Other segment information
Depreciation3	(33,506)	(35,415)	(45,286)	(32,093)	(1,496)	(2,816)	-	(150,612)
Amortisation	-	-	(1,013)	-	(457)	(34)	-	(1,504)
Impairment and write-off of assets, net	(72,718)	(39,245)	(57)	-	(95,113)	(13)	-	(207,146)

Assets
Capital expenditure	14,600	10,683	38,451	166,336	4,011	4,078	-	238,159

Current assets	17,456	13,818	63,941	31,958	30	5,435	-	132,638
Other non-current assets	53,458	50,591	220,307	633,169	181,662	72,481	-	1,211,668
Total segment assets	70,914	64,409	284,248	665,127	181,692	77,916	-	1,344,306
Not reportable assets4	-	-	-	-	-	198,743	-	198,743
Total assets	70,914	64,409	284,248	665,127	181,692	276,659	-	1,543,049

1 'Other' revenue relates to revenues earned by Empresa de Transmisión Callalli S.A.C.and Empresa de Transmisión Aymaraes S.A.C.

2 Comprised of administrative expenses of US$38,148,000, other income of US$8,021,000, other expenses of US$15,264,000, impairment and write-off of assets of US$207,146,000, finance income of US$1,898,000, finance expense of US$32,900,000, and foreign exchange loss of US$5,627,000.

3 Includes US$1,793,000 and US$6,077,000 of depreciation capitalised in the Crespo and the Inmaculada projects respectively.

4 Not reportable assets are comprised of available-for-sale financial assets of US$366,000, other receivables of US$72,662,000, income tax receivable of US$20,431,000, other financial assets of US$21,267,000 and cash and cash equivalents of US$84,017,000.

	Arcata US$000	Pallancata US$000	San Jose US$000	Inmaculada US$000	Exploration US$000	Other1 US$000	Adjustment and eliminations US$000	Total US$000
Year ended 31 December 2014
Revenue from external customers	106,061	147,360	213,013	-	-	26,517	-	492,951
Inter segment revenue	-	-	-	-	-	2,857	(2,857)	-
Total revenue	106,061	147,360	213,013	-	-	29,374	(2,857)	492,951

Segment profit/(loss)	5,054	20,894	28,429	-	(18,662)	447	(752)	35,410
Others2								(103,620)
Loss from continuing operations before income tax								(68,210)

Other segment information
Depreciation3	(31,348)	(48,008)	(46,820)	(7,558)	(930)	(3,014)	-	(137,678)
Amortisation	-	-	(1,181)	-	(458)	-	-	(1,639)
Impairment and write-off of assets, net	(499)	(31)	(717)	(85)	1,580	(139)	-	109

Assets
Capital expenditure	28,867	34,160	51,350	193,445	6,522	6,777	-	321,121

Current assets	27,993	21,174	66,995	5,877	35	9,161	-	131,235
Other non-current assets	143,524	112,365	223,295	497,771	277,829	71,631	-	1,326,415
Total segment assets	171,517	133,539	290,290	503,648	277,864	80,792	-	1,457,650
Not reportable assets4	-	-	-	-	-	248,662	-	248,662
Total assets	171,517	133,539	290,290	503,648	277,864	329,454	-	1,706,312

1 'Other' revenue relates to revenue for the sale of gold and silver generated by the Ares and Moris mine, revenues earned by Empresa de Transmisión Callalli S.A.C., and revenues earned by HMX S.A. de C.V. for services provided to the Moris mine and the Mexican exploration activities.

2 Comprised of administrative expenses of US$46,087,000, other income of US$4,112,000, other expenses of US$20,475,000, gain on the reversal of impairment net of write-off of assets of US$109,000, finance income of US$6,276,000, finance expense of US$42,565,000, and foreign exchange loss of US$4,990,000.

3 Includes US$967,000 and US$7,558,000 of depreciation capitalised in the Crespo and the Inmaculada projects respectively.

4 Not reportable assets are comprised of available-for-sale financial assets of US$455,000, other receivables of US$100,708,000, income tax receivable of US$25,584,000, deferred income tax assets of US$1,574,000, other financial assets of US$4,342,000 and cash and cash equivalents of US$115,999,000.

(b) Geographical information

The revenue for the period based on the country in which the customer is located is as follows:

	Year ended 31 December
	2015 US$000	2014 US$000
External customer
USA	229,229	96,427
Peru	63,328	178,217
Canada	58,154	36,421
Germany	7,428	10,987
Switzerland	12,174	45,020
United Kingdom	17,273	2,450
Korea	81,580	121,868
Japan	(20)	1,561
Total	469,146	492,951
Inter-segment
Peru	2,437	1,804
Mexico	-	1,053
Total	471,583	495,808

In the periods set out below, certain customers accounted for greater than 10% of the Group's total revenues as detailed
in the following table:

	Year ended 31 December 2015			Year ended 31 December 2014
	US$000	% Revenue	Segment	US$000	% Revenue	Segment
Republic Metals Corporation	106,339	23%	Arcata, Inmaculada and San Jose	44,725	9%	San Jose
LS Nikko	81,580	17%	Pallancata and San Jose	121,868	25%	Arcata, Pallancata and San Jose
Glencore Perú S.A.C.	38,502	8%	Arcata and Pallancata	114,192	23%	Arcata and Pallancata

Non-current assets, excluding financial instruments and deferred income tax assets, were allocated to the geographical areas in which the assets are located as follows:

	As at 31 December
	2015 US$000	2014 US$000
Peru	897,824	942,411
Argentina	220,307	223,295
Mexico	31,005	41,944
Chile	62,532	118,765
Total non-current segment assets	1,211,668	1,326,415
Available-for-sale financial assets	366	455
Trade and other receivables	10,187	6,488
Income tax receivable	47	-
Deferred income tax assets	-	1,574
Total non-current assets	1,222,268	1,334,932

4 Acquisitions and disposals

(a) Sale of subsidiary

In 2015 there were no acquisitions or disposals undertaken by the Group.

Minas Santa María de Moris, S.A. de C.V.

On 28 February 2014 the Group sold its interest in Minas Santa María de Moris, S.A. de C.V. ("Moris") to Exploraciones y Desarrollos Regiomontanos, S.A. de C.V. ("EDR") and Arturo Préstamo Elizondo ("APE") for consideration with a fair value of nil. The terms of the transaction stipulate that:

· the Group was entitled to a 1% net smelter return over the Moris concessions once production reaches 50,000 ounces of gold equivalent following the sale; and

· EDR and APE would assume all costs associated with the mine and plant rehabilitation obligations.

The carrying value of the net assets disposed was US$2,963,000 and the transaction resulted in a loss of US$2,963,000.

5 Revenue

	Year ended 31 December
	2015 US$000	2014 US$000
Gold (from dore bars)	142,077	62,911
Silver (from dore bars)	142,397	67,418
Gold (from concentrate)	68,414	109,045
Silver (from concentrate)	115,982	253,420
Services	276	157
Total	469,146	492,951

Included within revenue is a loss of US$7,275,000 relating to provisional pricing adjustments representing the change in the fair value of embedded derivatives (2014: loss of US$16,518,000) arising on sales of concentrates and dore (refer to note 2(p).

The realised gain on gold and silver swaps contracts in the period recognised within revenue was US$18,962,000 (gold: US$7,012,000, silver: US$11,950,000) (2014: US$14,603,000, gold: US$2,451,000, silver: US$12,152,000).

6 Cost of sales

Included in cost of sales are:

	Year ended 31 December
	2015 US$000	2014 US$000
Depreciation and amortisation	142,712	128,720
Personnel expenses (notes 10 and 11)	107,823	114,322
Mining royalty (note 30)	5,968	6,581
Change in products in process and finished goods	(10,255)	8,641

7 Administrative expenses

	Year ended 31 December
	2015 US$000	2014 US$000
Personnel expenses (notes 10 and 11)	22,427	24,206
Professional fees	3,095	3,846
Social and community welfare expenses1	597	1,943
Lease rentals	1,415	1,442
Travel expenses	576	865
Communications	560	579
Indirect taxes	2,147	2,678
Depreciation and amortisation	1,534	2,072
Technology and systems	745	718
Security	790	951
Supplies	134	188
Other	4,128	6,599
Total	38,148	46,087

1 Represents amounts expended by the Group on social and community welfare activities surrounding its mining units.

8 Exploration expenses

	Year ended 31 December
	2015 US$000	2014 US$000
Mine site exploration1
Arcata	62	2,038
Ares	50	42
Selene	-	58
Inmaculada	6	-
Pallancata	2,457	1,728
San Jose	1,463	1,003
	4,038	4,869
Prospects2
Peru	303	788
Argentina	43	73
Mexico	-	195
Chile	71	237
	417	1,293
Generative3
Peru	499	1,180
Argentina	-	11
Mexico	-	2,588
Chile	-	379
	499	4,158
Personnel (notes 10 and 11(1))	2,967	7,412
Others	1,334	408
Total	9,255	18,140

1 Mine-site exploration is performed with the purpose of identifying potential minerals within an existing mine-site, with the goal of maintaining or extending
the mine's life.

2 Prospects expenditure relates to detailed geological evaluations in order to determine zones which have mineralisation potential that is economically viable
for exploration. Exploration expenses are generally incurred in the following areas: mapping, sampling, geophysics, identification of local targets and
reconnaissance drilling.

3 Generative expenditure is very early stage exploration expenditure related to the basic evaluation of the region to identify prospects areas that have the geological conditions necessary to contain mineral deposits. Related activities include regional and field reconnaissance, satellite images, compilation of public information and identification of exploration targets.

The Group determines the cash flows which relate to the exploration activities of the companies engaged only in exploration. Exploration activities incurred by Group operating companies are not included since it is not practivable to separate the liabilities related to the exploration activities of these companies from their operating liabilities.

Cash outflows on exploration activities were US$1,190,000 in 2015 (2014: US$3,362,000).

9 Selling expenses

	Year ended 31 December
	2015 US$000	2014 US$000
Transportation of dore, concentrate and maritime freight	3,548	6,020
Sales commissions	200	429
Personnel expenses (note 10)	254	249
Warehouse services	1,610	2,930
Taxes	12,994	15,609
Other	3,123	3,460
Total	21,729	28,697

10 Personnel expenses1

	Year ended 31 December
	2015 US$000	2014 US$000
Salaries and wages	103,433	115,770
Workers' profit sharing	-	(34)
Other legal contributions	20,735	22,168
Statutory holiday payments	6,534	7,074
Long Term Incentive Plan	1,013	(657)
Restricted share plan	2,843	-
Termination benefits	3,623	11,570
Other	1,584	1,805
Total	139,765	157,696

1 Personnel expenses are distributed in cost of sales, administrative expenses, exploration expenses, selling expenses, other expenses and capitalised as property plant and equipment amounting to US$107,823,000 (2014: US$114,322,000), US$22,427,000 (2014: US$24,206,000), US$2,967,000 (2014: US$7,412,000), US$254,000 (2014: US$249,000), US$1,218,000 (2014: US$1,642,000) and US$5,076,000 (2014: US$9,865,000) respectively.

Average number of employees for 2015 and 2014 were as follows:

	Year ended 31 December
	2015	2014
Peru	2,575	2,852
Argentina	1,129	1,179
Mexico	-	19
Chile	3	11
United Kingdom	10	9
Total	3,717	4,070

11 Pre-tax exceptional items

Exceptional items are those significant items which, due to their nature or the expected infrequency of the events giving rise to them, need to be disclosed separately on the face of the income statement to enable a better understanding of the financial performance of the Group and facilitate comparison with prior years.

	Year ended 31 December
	2015 US$000	2014 US$000
Cost of sales
Termination benefits1	(1,514)	(1,327)
Termination benefits Ares mine unit2	-	(3,511)
Work stoppage at Arcata mine unit	-	(1,227)
Total	(1,514)	(6,065)
Administrative expenses
Termination benefits1	-	(2,752)
Total	-	(2,752)
Exploration expenses
Termination benefits1	-	(886)
Total	-	(886)
Other expenses
Loss on sale of subsidiary3	-	(2,963)
Total	-	(2,963)
Impairment and write-off of assets (net)
Impairment and write-off of assets4	(207,146)	(1,534)
Reversal of impairment of assets5	-	1,643
Total	(207,146)	109
Finance income
Gain on sale of available-for-sale financial assets6	-	4,061
Total	-	4,061
Finance costs
Amortisation of transaction costs on secure bank loans7	-	(3,336)
Loss from changes in the fair value of financial instruments8	-	(6,155)
Interest on disputed tax charges9	(1,486)	-
Total	(1,486)	(9,491)
Income tax benefit	36,888	3,845
Total	36,888	3,845

1 Termination benefits paid to workers following the cashflow optimisation programme approved by management, amounting to US$1,514,000 (2014:US$4,965,000).

2 Termination benefits generated in connection with the suspension of the Ares mine unit.

3 Loss generated by the sale of the Group´s interest in Moris (refer to note 4(a)).

4 As at 31 December 2015 corresponds to the impairment of the Pallancata mine unit of US$39,026,000, the Arcata mine unit of US$72,424,000, the Crespo project of US$14,350,000, the Azuca project of US$12,766,000, the Volcan project of US$57,070,000 and the San Felipe project of US$10,927,000, and to the write-off of assets of US$583,000. As at 31 December 2014 corresponds to the write-off of assets of US$1,534,000.

5 Corresponds to a reversal of previously recorded impairment at the San Felipe property of US$1,643,000 (note 17).

6 Corresponds to the gain on sale of the Group´s holding in Gold Resource Corp ('GRC') of US$2,642,000, Chaparral Gold of US$842,000, Mirasol Resources Ltd of US$556,000 and Northern Superior Resources Inc of US$21,000.

7 Corresponds to the attributable issue cost of the syndicated US$270,000,000 loan, granted in 2013 and repaid in January 2014, to Compañía Minera Ares S.A.C., disclosed as an exceptional item as a significant one-off expense.

8 As at 31 December 2014 corresponds to the impairment of the investments in Pembrook Mining Corp of US$6,000,000, Brionor Resources of US$54,000, Revelo Resources Corp (formerly Iron Creek Capital Corp) of US$53,000, Northern Superior Resources Inc of US$45,000 and Empire Petroleum Corp of US$3,000.

9 Interest on overdue tax charges owed by the Group following a change in circumstances surrounding a tax dispute with the Peruvian tax authority, resulting in the exposure now being assessed as 'probable', rather than 'possible'.

12 Other income and other expenses before exceptional items

	Year ended 31 December 2015	Year ended 31 December 2014
	Before exceptional items US$000	Before exceptional items US$000
Other Income
Export credit	2,743	1,386
Lease rentals	443	586
Logistic services	3,699	-
Other	1,136	2,140
	8,021	4,112
Other expenses
Increase in provision for mine closure (note 26(4))	(7,590)	(9,088)
Tax on mining reserves in Argentina (note 30)	(441)	(3,453)
Provision of obsolescence of supplies	(1,046)	945
Contingencies	(108)	(1,680)
Write off of value added tax	(795)	(37)
Other	(5,284)	(4,199)
Total	(15,264)	(17,512)

13 Finance income and finance costs before exceptional items

	Year ended 31 December 2015	Year ended 31 December 2014
	Before exceptional items US$000	Before exceptional items US$000
Finance income
Interest on deposits and liquidity funds	648	1,567
Interest income	648	1,567
Dividends	-	525
Gain on repurchase of bonds	856	-
Other	394	123
Total	1,898	2,215
Finance costs
Interest on secured bank loans (note 25)	(5,842)	(5,027)
Interest on convertible bond1	-	(5,364)
Other interest	(1,657)	-
Interest on bond (note 25)	(22,096)	(20,302)
Interest expense	(29,595)	(30,693)
Unwind of discount	(505)	(1,865)
Loss from changes in the fair value of financial instruments	(116)	(90)
Other	(1,198)	(426)
Total	(31,414)	(33,074)

1 Relates to US$115,000,000 of senior unsecured convertible bonds, due in 2014, which were convertible into ordinary shares of Hochschild Mining plc. The Group settled the convertible bonds in cash upon their maturity in October 2014. The bonds had a coupon of 5.75% per annum payable semi-annually on 28 January and 28 July of each year.

14 Income tax expense

	Year ended 31 December 2015			Year ended 31 December 2014
	Before exceptional items US$000	Exceptional items US$000	Total US$000	Before exceptional items US$000	Exceptional items US$000	Total US$000
Current corporate income tax from continuing operations
Current corporate income tax charge	5,200	(259)	4,941	10,082	(251)	9,831
Current mining royalty charge (note 30)	1,778	-	1,778	1,611	-	1,611
Current special mining tax charge (note 30)	755	-	755	375	-	375
Withholding taxes	(142)	-	(142)	(343)	-	(343)
	7,591	(259)	7,332	11,725	(251)	11,474
Deferred taxation
Origination and reversal of temporary differences from continuing operations (note 27)	12,637	(36,629)	(23,992)	(457)	(3,851)	(4,308)
Effect of change in tax rate	142	-	142	(4,802)	257	(4,545)
	12,779	(36,629)	(23,850)	(5,259)	(3,594)	(8,853)
Total taxation charge/(credit) in the income statement	20,370	(36,888)	(16,518)	6,466	(3,845)	2,621

The weighted average statutory income tax rate was 25.4% for 2015 and 28.7% for 2014. This is calculated as the average of the statutory tax rates applicable in the countries in which the Group operates, weighted by the profit/(loss) before tax of the Group companies in their respective countries as included in the consolidated financial statements.

The change in the weighted average statutory income tax rate is due to a change in the weighting of profit/(loss) before tax in the various jurisdictions in which the Group operates.

In December 2014, the Peruvian government approved a schedule for the gradual reduction of the statutory income tax rate, from its current level of 30% to 26% by 2019.

The tax related to items charged or credited to equity is as follows:

	As at 31 December
	2015 US$000	2014 US$000
Deferred taxation:
Deferred income tax relating to fair value gains on cash flow hedges	4,739	1,216
Total tax charge in the statement of other comprehensive income	4,739	1,216

The total taxation charge on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the consolidated profits of the Group companies as follows:

	As at 31 December
	2015 US$000	2014 US$000
Loss from continuing operations before income tax	(256,175)	(68,210)
At average statutory income tax rate of 25.4% (2014: 28.7%)	(65,017)	(19,547)
Expenses not deductible for tax purposes	1,040	3,058
Non-taxable income1	-	(851)
Deferred tax recognised on special investment regime	(691)	(780)
Movement in unrecognised deferred tax²	16,565	6,700
Change in statutory income tax rate	142	(4,545)
Withholding tax	(142)	(343)
Special mining tax and mining royalty3	2,533	1,986
Derecognition of deferred tax asset	1,251	-
Foreign exchange rate effect4	24,964	14,473
Other	2,837	2,470
At average effective income tax rate of 6.4% (2014: -3.8%)	(16,518)	2,621
Taxation charge attributable to continuing operations	(16,518)	2,621
Total taxation charge in the income statement	(16,518)	2,621

1 2014: Mainly corresponds to the gain on sale of Gold Resource Corp shares.

2 Includes the effect of the impairment of Volcan and San Felipe projects of US$11,414,000 and US$3,278,000 respectively.

3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 30).

4 Mainly corresponds to the foreign exchange effect of converting tax bases and monetary items from local currency to the functional currency.

15 Basic and diluted earnings per share

Earnings per share ('EPS') is calculated by dividing profit/(loss) for the year attributable to equity shareholders of the Company by the weighted average number of ordinary shares issued during the year.

The Company has dilutive potential ordinary shares.

As a result of the rights issue being at a discounted price, the number of ordinary shares outstanding has increased due to the bonus element resulting in the calculation of basic and diluted earnings per share for all periods presented having been adjusted retrospectively.

As at 31 December 2015 and 2014, EPS has been calculated as follows:

	As at 31 December
	2015	2014
Basic loss per share from continuing operations
Before exceptional items (US$)	(0.14)	(0.13)
Exceptional items (US$)	(0.38)	(0.03)
Total for the year and from continuing operations (US$)	(0.52)	(0.16)
Diluted loss per share from continuing operations
Before exceptional items (US$)	(0.14)	(0.13)
Exceptional items (US$)	(0.38)	(0.03)
Total for the year and from continuing operations (US$)	(0.52)	(0.16)

Net loss from continuing operations before exceptional items and attributable to equity holders of the parent is derived
as follows:

	As at 31 December
	2015	2014
Loss attributable to equity holders of the parent - continuing operations (US$000)	(234,610)	(68,877)
Exceptional items after tax - attributable to equity holders of the parent (US$000)	172,758	13,914
Loss from continuing operations before exceptional items attributable to equity holders of the parent (US$000)	(61,852)	(54,963)
Diluted loss from continuing operations before exceptional items attributable to equity holders of the parent (US$000)	(61,852)	(54,963)

The following reflects the share data used in the basic and diluted loss per share computations:

	As at 31 December
	2015	2014
Basic weighted average number of ordinary shares in issue (thousands)	449,511	421,783
Dilutive potential ordinary shares related to contingently issuable shares (thousands)1	-	-
Diluted weighted average number of ordinary shares in issue and dilutive potential ordinary shares (thousands)	449,511	421,783

1 The potential ordinary shares related to the contingently issuable shares under the Enhanced Long Term Incentive Plan and Restricted Share Plan" have not been included in the calculation of diluted EPS for 2015 and 2014 as they have an antidilutive effect.

16 Property, plant and equipment

	Mining properties and development costs1 US$000	Land and buildings US$000	Plant and equipment US$000	Vehicles US$000	Mine closure asset US$000	Construction in progress and capital advances US$000	Total US$000
Year ended 31 December 2015
Cost
At 1 January 2015	999,777	257,171	389,042	6,030	96,213	237,308	1,985,541
Additions	91,862	632	31,455	-	-	106,737	230,686
Change in discount rate	-	-	-	-	(755)	-	(755)
Change in mine closure estimate	-	-	-	-	7,928	-	7,928
Disposals	-	(195)	(952)	(196)	-	-	(1,343)
Write-offs			(2,382)	(118)		(5)	(2,505)
Transfer from intangibles	582	-	-	-	-	-	582
Transfers and other movements2	4,886	214,485	63,584	435	-	(281,648)	1,742
At 31 December 2015	1,097,107	472,093	480,747	6,151	103,386	62,392	2,221,876
Accumulated depreciation and impairment
At 1 January 2015	526,824	134,638	193,210	3,663	49,486	1,410	909,231
Depreciation for the year	91,129	23,333	32,053	913	3,184	-	150,612
Disposals	-	(179)	(223)	(124)	-	-	(526)
Impairment	60,259	20,752	30,451	71	7,120	-	118,653
Write-offs	-	-	(1,839)	(83)	-	-	(1,922)
Transfers and other movements2	335	492	(264)	7	-	(258)	312
At 31 December 2015	678,547	179,036	253,388	4,447	59,790	1,152	1,176,360
Net book amount at 31 December 2015	418,560	293,057	227,359	1,704	43,596	61,240	1,045,516

There were borrowing costs capitalised in property, plant and equipment amounting to US$8,252,000 (2014: US$9,904,000). The capitalisation rate used was 6.79% (2014: 8.83%).

1 Mining properties and development costs related to Azuca, Crespo and Volcan projects are not currently being depreciated.

2 Net of transfers and other movements of US$1,430,000 were transferred from evaluation and exploration assets.

At the end of 2015, given the continued challenging environment for the mining sector, the Group carried out an impairment review of all of its operating mines (Arcata, Pallancata, Inmaculada and San Jose), and its growth projects (Crespo, Azuca, San Felipe and Volcan). As a result of this review the Group recognised an impairment charge in the Pallancata mine unit of US$39,026,000, the Arcata mine unit of US$72,424,000, the Crespo project of US$14,350,000, the Azuca project of US$12,766,000, San Felipe project of US$10,927,000 and the Vocan project of US$57,070,000. The impairment recognised in property plant and equipment was US$118,653,000, in evaluation and exploration assets was US$74,550,000 and in intangibles was US$13,360,000 (refer to note 17 and 18).

The recoverable values of these CGUs were determined using a fair value less costs of disposal (FVLCD) methodology. FVLCD was determined using a combination of level 2 and level 3 inputs to construct a discounted cash flow model to estimate the amount that would be paid by a willing third party in an arm's length transaction. The key assumptions on which management has based its determination of FVLCD, and the associated recoverable values calculated are presented below.

Gold and silver prices

US$ per oz.	2016	2017	2018	2019	Long-term
Gold	1,175	1,200	1,213	1,240	1,224
Silver	16	17	18	19	18

Other key assumptions

Arcata

Pallancata

San Jose

Inmaculada

Crespo

Azuca

San Felipe

Volcan

Discount rate (post tax)

6.3%

9.7%

6.3%

7.8%

n/a

Value per in-situ ounce (per tonne in the case of San Felipe)

n/a

0.25

16.21

6.55

1 With respect to the Azuca, Volcan and San Felipe growth projects, given their early stage, the Group applied a value in-situ methodology, which applies a realisable 'enterprise value' to unprocessed mineral resources. The methodology is used to determine the fair value less costs of disposal of the Azuca, Volcan which includes the water permits held by the Group, and San Felipe CGUs. The enterprise value used in the calculation performed at 31 December 2015 was US$6.55 per gold equivalent ounce of resources (Volcan), $0.25 per silver equivalent ounce of resources (Azuca) and US$16.21 per zinc equivalent tonne of resources (San Felipe). The enterprise value figures are based on observable external market information.

Current carrying value of CGU, net of deferred tax (US$000)		Arcata		Pallancata		San Jose		Inmaculada		Crespo		Azuca	San Felipe			Volcan
31 December 2015		42,956		49,331		160,055		587,208		46,275		26,102	4,218			62,512

Crespo, Azuca and San Felipe projects correspond to the exploration segment.

Sensitivity analysis

Other than as disclosed below, management believes that no reasonably possible change in any of the key assumptions above would cause the carrying value of any of its cash generating units to exceed its recoverable amount.

The estimated recoverable amounts of the following of the Group's CGUs are equal to, or not materially greater than, their carrying values; consequently, any adverse change in the following key assumptions would, in isolation, cause an impairment loss to be recognised:

Approximate impairment resulting from the following changes (US$000)	Arcata	Pallancata	San Jose	Inmaculada	Crespo	Azuca	San Felipe	Volcan
Prices (10% decrease)	(42,956)	(14,892)	(89,961)	(86,439)	(16,308)	n/a	n/a	n/a
Post tax discount rate (3% increase)	(5,354)	(3,525)	(28,570)	(50,812)	(12,348)	n/a	n/a	n/a
Production costs (10% increase)	(42,956)	(8,082)	(48,914)	(20,495)	(7,397)	n/a	n/a	n/a
Value per in-situ ounce (per tonne in the case of San Felipe) (10% decrease)	n/a	n/a	n/a	n/a	n/a	(2,610)	(422)	(6,251)

	Mining properties and development costs US$000	Land and buildings US$000	Plant and equipment US$000	Vehicles US$000	Mine closure asset US$000	Construction in progress and capital advances US$000	Total US$000
Year ended 31 December 2014
Cost
At 1 January 2014	869,780	220,083	371,079	6,511	74,362	136,383	1,678,198
Additions	136,742	1,913	20,281	46	-	157,192	316,174
Change in discount rate	-	-	-	-	4,357	-	4,357
Change in mine closure estimate	-	-	-	-	18,741	-	18,741
Disposals	-	(178)	(2,657)	(309)	-	(61)	(3,205)
Write-offs	(114)	(276)	(3,943)	(308)	-	-	(4,641)
Disposal of subsidiary (note 4(a))	(11,015)	(7,851)	(6,972)	(355)	(1,247)	-	(27,440)
Transfers and other movements1	4,384	43,480	11,254	445	-	(56,206)	3,357
At 31 December 2014	999,777	257,171	389,042	6,030	96,213	237,308	1,985,541
Accumulated depreciation and impairment
At 1 January 2014	452,777	120,923	175,453	3,645	48,425	3,498	804,721
Depreciation for the year	84,928	19,836	29,854	752	2,308	-	137,678
Disposals	-	(178)	(2,385)	(256)	-	-	(2,819)
Write-offs	(51)	(184)	(2,677)	(195)	-	-	(3,107)
Disposal of subsidiary (note 4(a))	(11,015)	(7,851)	(6,969)	(345)	(1,247)	-	(27,427)
Transfers and other movements1	185	2,092	(66)	62	-	(2,088)	185
At 31 December 2014	526,824	134,638	193,210	3,663	49,486	1,410	909,231
Net book amount at 31 December 2014	472,953	122,533	195,832	2,367	46,727	235,898	1,076,310

1 Net of transfers and other movements of US$3,172,000 were transferred from evaluation and exploration assets.

17 Evaluation and exploration assets

	Azuca US$000	Crespo US$000	San Felipe US$000	Volcan US$000	Others US$000	Total US$000
Cost
Balance at 1 January 2014	75,540	29,176	55,950	90,575	10,684	261,925
Additions	821	-	-	1,463	2,382	4,666
Transfers from/( to) property, plant and equipment	3,593	(3,620)	-	(3)	(3,822)	(3,852)
Balance at 31 December 2014	79,954	25,556	55,950	92,035	9,244	262,739
Additions	211	224	-	958	5,468	6,861
Transfers from/(to) property plant and equipment	-	-	-	-	(1,742)	(1,742)
Balance at 31 December 2015	80,165	25,780	55,950	92,993	12,970	267,858
Accumulated impairment
Balance at 1 January 2014	29,862	9,130	16,550	-	1,740	57,282
Impairment1	-	-	(1,643)	-	-	(1,643)
Transfers from/(to) property, plant and equipment	3,430	(3,620)	-	-	-	(190)
Balance at 31 December 2014	33,292	5,510	14,907	-	1,740	55,449
Impairment1	12,584	4,368	10,927	44,381	2,290	74,550
Transfers from/(to) property, plant and equipment	-	-	-	-	(312)	(312)
Balance at 31 December 2015	45,876	9,878	25,834	44,381	3,718	129,687
Net book value as at 31 December 2014	46,662	20,046	41,043	92,035	7,504	207,290
Net book value as at 31 December 2015	34,289	15,902	30,116	48,612	9,252	138,171

There were no borrowing costs capitalised in evaluation and exploration assets.

1 In 2015 the Group recognised an impairment charge of US$74,550,000, mainly related to the Volcan project (refer to note 16). The FVLCD calculation is detailed in note 16. In 2014, the Group partially reversed the impairment of the San Felipe project of US$1,643,000.

18 Intangible assets

	Transmission line1 US$000	Water permits2 US$000	Software licences US$000	Legal rights3 US$000	Total US$000
Cost
Balance at 1 January 2014	22,157	26,583	1,348	6,404	56,492
Additions	-	-	4	277	281
Transfer	-	-	421	-	421
Balance at 31 December 2014	22,157	26,583	1,773	6,681	57,194
Additions	-	-	25	587	612
Transfer	-	-	-	(582)	(582)
Balance at 31 December 2015	22,157	26,583	1,798	6,686	57,224
Accumulated amortisation and impairment
Balance at 1 January 2014	10,022	-	1,238	1,549	12,809
Amortisation for the year4	1,102	-	79	458	1,639
Transfer	-	-	(69)	-	(69)
Balance at 31 December 2014	11,124	-	1,248	2,007	14,379
Amortisation for the year4	946	-	67	491	1,504
Impairment5	-	12,686	-	674	13,360
Balance at 31 December 2015	12,070	12,686	1,315	3,172	29,243
Net book value as at 31 December 2014	11,033	26,583	525	4,674	42,815
Net book value as at 31 December 2015	10,087	13,897	483	3,514	27,981

1 The transmission line is amortised using the units of production method. At 31 December 2015 the remaining amortisation period is approximately 10 years.

2 Corresponds to the acquisition of water permits of Andina Minerals Group ("Andina"). They have an indefinite life according to Chilean law. In the case of the water permits the Group applied a value in situ methodology, which applies a realisable 'enterprise value' to unprocessed mineral resources. The methodology is used to determine the fair value less costs of disposal of the Volcan cash-generating unit, which includes the water permits held by the Group. The enterprise value used in the calculation performed at 31 December 2015 was US$10.29 per gold equivalent ounce of resources (2014: US$18.00). The enterprise value figures are based on observable external market information

3 Legal rights correspond to expenditures required to give the Group the right to use a property for the surface exploration work, development and production.
At 31 December 2015 the remaining amortisation period is 10 years.

4 The amortisation for the period is included in cost of sales and administrative expenses in the income statement.

5 Correspond to the impairment of the Crespo and Volcan projects (refer to note 16).

The carrying amount of water permits is reviewed annually to determine whether it is in excess of its recoverable amount.

19 Available-for-sale financial assets

	Year ended 31 December
	2015 US$000	2014 US$000
Beginning balance	455	51,658
Fair value change recorded in equity	(86)	(3,106)
Disposals1	(3)	(48,097)
Ending balance	366	455

1 As at 31 December 2014 corresponds to the sales of 9,451,874 shares of Gold Resource Corp., 3,334,000 shares of Norther Superior Resources Inc., 3,755,746 shares of Chaparral Gold Corp., and 500,000 shares of Mirasol Resources Ltd.

The fair value of the listed shares is determined by reference to published price quotations in an active market.

The investments in unlisted shares (Pembrook Mining Corp. and ECI Exploration and Mining Inc.) were recognised at cost less any recognised impairment losses given that there is not an active market for these investments. The investments in ECI Exploration and Mining Inc. and Pembrook Mining Corp. were fully impaired as at 31 December 2014 and 2015.

20 Trade and other receivables

	As at 31 December
	2015		2014
	Non-current US$000	Current US$000	Non-current US$000	Current US$000
Trade receivables	-	62,352	-	72,818
Advances to suppliers	-	6,567	-	5,347
Duties recoverable from exports of Minera Santa Cruz	4,698	-	2,016	6,000
Receivables from related parties (note 29(a))	-	11	-	45
Loans to employees	991	149	1,192	748
Interest receivable	-	36	-	78
Receivable from Kaupthing, Singer and Friedlander Bank	-	252	-	264
Other1	1,567	13,518	2,186	15,939
Provision for impairment2	-	(5,327)	-	(5,136)
Assets classified as receivables	7,256	77,558	5,394	96,103
Prepaid expenses	60	1,157	389	11,336
Value Added Tax (VAT)3	2,871	46,112	705	59,599
Total	10,187	124,827	6,488	167,038

The fair values of trade and other receivables approximate their book value.

1 Mainly corresponds to account receivables from contractors for the sale of supplies of US$4,791,000 (2014: US$9,763,000), a tax claim related to the withholding tax on the GRC dividends received of US$142,000 (2014: US$1,447,000), other tax claims of US$2,840,000 (2014: US$2,767,000 ).

2 Includes the provision for impairment of trade receivable from a customer in Peru of US$1,108,000 (2014: US$1,108,000), the impairment of deposits in Kaupthing, Singer and Friedlander of US$252,000 (2014: US$264,000) and other receivables of US$3,967,000 (2014: US$3,764,000) that mainly relates to an exploration project that would be recovered through an ownership interest if it succeeds.

3 Primarily relates to US$13,078,000 (2014: US$19,583,000) of VAT receivable related to the San Jose project that will be recovered through future sales of gold and silver by Minera Santa Cruz S.A. It also includes the VAT of Compañía Minera Ares S.A.C. of US$32,086,000 (2014: US$35,026,000). The VAT is valued at its recoverable amount.

Movements in the provision for impairment of receivables:

		Individually impaired US$000
At 1 January 2014		5,084
Provided for during the year		110
Released during the year		(58)
At 31 December 2014		5,136
Provided for during the year		446
Released during the year		(255)
At 31 December 2015		5,327

As at 31 December 2015 and 2014, none of the financial assets classified as receivables (net of impairment) were past due.

21 Inventories

	As at 31 December
	2015 US$000	2014 US$000
Finished goods valued at cost	14,120	7,147
Finished goods at net realisable value	1,856	-
Products in process valued at cost	13,632	13,326
Products in process at net realizable value	1,121	-
Supplies and spare parts	44,855	42,404
	75,584	62,877
Provision for obsolescence of supplies	(5,298)	(4,460)
Total	70,286	58,417

Finished goods include ounces of gold and silver, dore and concentrate. Products in process include dore, concentrate and stockpile.

The Group either sells dore bars as a finished product or if it is commercially advantageous to do so, delivers the bars for refining into gold and silver ounces which are then sold. In the latter scenario, the dore bars are classified as products in process. The amount of dore on hand at 31 December 2015 included in products in process is US$3,827,000 (2014: US$1,405,000).

Concentrate is sold to smelters, but in addition could be used as a product in process to produce dore.

As part of the Group's short-term financing policies, it acquires pre-shipment loans which are guaranteed by the sales contracts.

The amount of expense recognised in profit and loss related to the consumption of inventory of supplies, spare parts and raw materials is US$78,525,000 (2014: US$75,066,000).

Movements in the provision for obsolescence comprise an increase in the provision of US$1,046,000 (2014: US$192,000) and the reversal of US$Nil relating to the sale of supplies and spare parts, that had been provided for (2014: US$1,137,000).

22 Cash and cash equivalents

	As at 31 December
	2015 US$000	2014 US$000
Cash at bank	368	293
Liquidity funds1	337	935
Current demand deposit accounts2	47,717	76,850
Time deposits3	35,595	37,921
Cash and cash equivalents considered for the statement of cash flows4	84,017	115,999

The fair value of cash and cash equivalents approximates their book value. The Group does not have undrawn borrowing facilities available in the future for operating activities or capital commitments.

1 The liquidity funds are mainly invested in certificates of deposit, commercial papers and floating rate notes with a weighted average maturity of 14 days as at 31 December 2015 (2014: average of 10 days).

2 Relates to bank accounts which are freely available and bear interest.

3 These deposits have an average maturity of 2 days (2014: Average of 2 days).

4 Funds deposited in Argentinean institutions are effectively restricted for transfer to other countries and are invested locally. Included within cash and cash equivalents at 31 December 2015 is US$11,696,000 (2014: US$14,233,000), which is not readily available for use in subsidiaries outside of Argentina.

23 Deferred income

On 3 August 2011, Hochschild entered into an agreement with Impulsora Minera Santa Cruz ("IMSC") whereby IMSC acquired the right to explore the San Felipe properties and an option to purchase the related concessions. Under the terms of this agreement the Group has received the following non-refundable payments to date:

	As at 31 December
	2015 US$000	2014 US$000
San Felipe contract	25,000	25,000

These payments reduce the total consideration IMSC will be required to pay upon exercise of the option on December 2016, and constitute an advance of the final purchase price, rather than an option premium, as such, they were recorded as deferred income. On 7 July 2015, IMSC renegotiated terms of the agreement, postponing the advance payment of US$5,000,000 from 1 December 2015 to 1 December 2016.

24 Trade and other payables

	As at 31 December
	2015		2014
	Non-current US$000	Current US$000	Non-current US$000	Current US$000
Trade payables1	-	58,655	-	64,458
Salaries and wages payable2	-	20,278	-	23,890
Dividends payable	-	826	-	1,789
Taxes and contributions	57	9,605	-	11,441
Guarantee deposits	-	7,163	-	7,327
Mining royalty (note 30)	-	796	-	951
Accounts payable to related parties (note 29)	-	40	-	49
Account payable to Graña & Montero3	20,322	-	-	-
Other	-	4,529	92	1,985
Total	20,379	101,892	92	111,890

The fair value of trade and other payables approximate their book values.

1 Trade payables relate mainly to the acquisition of materials, supplies and contractors' services. These payables do not accrue interest and no guarantees have been granted.

2 Salaries and wages payable relates to remuneration payable. There were no board members remuneration and long term incentive plan payable at 31 December 2015 and 2014.

3 Related to the construction of Inmaculada mine unit. Includes the principal of US$20,000,000 plus interests of US$322,000, calculated at a 5% interest rate. The payment of the amount owing is to be made in four instalments every six months starting in September 2017.

25 Borrowings

	As at 31 December
	2015			2014
	Effective interest rate	Non-current US$000	Current US$000	Effective interest rate	Non-current US$000	Current US$000
Bond payable (a)	8.56%	290,230	8,777	8.48%	342,043	13,457
Secured bank loans (b)
· Pre-shipment loans in Minera Santa Cruz (note 21)	29.64%	-	10,554	29.08%	-	13,843
· Medium-term bank loan	3.82%	49,548	229	3.47%	98,791	582
· Short-term bank loans	0.7% to 1.35%	-	75,200	-	-	-
Total		339,778	94,760		440,834	27,882

(a) Bond payable

On 23 January 2014 the Group issued US$350,000,000 7.75% Senior Unsecured Notes of Compañía Minera Ares S.A.C. guaranteed by Hochschild Mining plc and Hochschild Mining (Argentina) Corporation S.A.The interest is paid semiannually, until maturity in 23 January 2021.During November and Decembe 2015, the Group repurchased bonds amounting to US$55,225,000 for $54,369,000, giving rise to a gain on repurchase of US$856,000 (see note 12). The balance at 31 December 2015 comprises the carrying value, including accrued interest payable, of US$299,007,000 (2014: US$355,500,000) determined in accordance with the effective interest method.

The following options could be taken before the maturity:

· Optional Redemption with Proceeds of Equity Offerings: Up to 35% at 107.750% prior to 23 January 2017

· Optional Redemption with Make-Whole Premium: At any time prior to 23 January 2018, the issuer may redeem all or part of the notes, at a price equal to 100% of the outstanding principal amount of the notes plus accrued and unpaid interest and additional amounts, if any, to the redemption date, plus a "make-whole" premium at Treasury Rate + 50 bps.

· Optional Redemption without Make-Whole Premium: The issuer may redeem all or part of the notes on or after 23 January 2018 at the redemption prices specified plus accrued and unpaid interest and additional amounts, if any, to the redemption date. The Make Whole Premium requires repayment of 103.875%, 101.938% or 100% of the outstanding principal balance if exercised in 2018, 2019 or 2020 respectively.

· Optional Redemption Upon Tax Event: 100% of the outstanding principal amount plus accrued and unpaid interest and additional amounts, if any.

· Change of Control Offer: 101% of principal amount plus accrued and unpaid interest.

(b) Secured bank loans:

Medium-term bank loan:

Credit agreement of US$100,000,000 with Scotiabank Peru S.A.A. acting as Lead Arranger and The Bank of Nova Scotia and Corpbanca as lenders. The borrower is Compañía Minera Ares S.A.C. and the loan is guaranteed by Hochschild Mining plc. The loan has an interest rate of LIBOR + 2.6% payable quarterly. On November 2015 the Group paid US$50,000,000 of principal and modified the schedule of repayments, starting on 30 March 2018 until maturity on 30 December 2019. The carrying value including accrued interest payable at 31 December 2015 of US$49,777,000 (2014: US$99,373,000) was determined in accordance with the effective interest method.

Short-term bank loans:

Six credit agreements signed by Compañía Minera Ares S.A.C. with BBVA Continental. The loans have an interest rate ranging from 0.7% to 1.35%. The carrying value including accrued interest payable at 31 December 2015 is US$75,200,000 (2014: US$Nil)

The maturity of non-current borrowings is as follows:

	As at 31 December
	2015 US$000	2014 US$000
Between 1 and 2 years	-	16,660
Between 2 and 5 years	49,548	82,131
Over 5 years	290,230	342,043
Total	339,778	440,834

The carrying amount of current borrowings differs their fair value only with respect to differences arising under the effective interest rate calculations described above. The carrying amount and fair value of the non‑current borrowings are as follows:

	Carrying amount as at 31 December		Fair value as at 31 December
	2015 US$000	2014 US$000	2015 US$000	2014 US$000
Secured bank loans	49,548	98,791	48,223	99,083
Bond payable	290,230	342,043	274,878	348,250
Total	339,778	440,834	323,101	447,333

The fair value of secured bank loans was determined by discounting the remaining principal and interest payments at the three month U.S. LIBOR rate plus 2.6 percent. The U.S. LIBOR rate is a Level 1 input. In the case of the bond payable, the fair value was determined with reference to the quoted price of these bonds in an active market, another Level 1 input.

26 Provisions

	Provision for mine closure1 US$000	Workers' profit sharing2 US$000	Long Term Incentive Plan3 US$000	Other US$000	Total US$000
At 1 January 2014	82,149	374	1,879	4,820	89,222
Additions	-	-	-	1,680	1,680
Accretion	242	-	-	-	242
Change in discount rate	4,357	-	-	-	4,357
Change in estimates	27,8294	-	(1,285)	-	26,544
Payments	(5,524)	(374)	-	(260)	(6,158)
Sale of subsidiary (note 4(a))	(1,266)	-	-	-	(1,266)
At 31 December 2014	107,787	-	594	6,240	114,621
Less current portion	-	-	-	(2,870)	(2,870)
Non-current portion	107,787	-	594	3,370	111,751
At 1 January 2015	107,787	-	594	6,240	114,621
Additions	-	-	544	108	652
Accretion	69	-	-	-	69
Change in discount rate	(755)	-	-	-	(755)
Change in estimates	15,5174	-	(175)	-	15,342
Foreign exchange effect	-	-	-	126	126
Payments	(2,538)	-	-	-	(2,538)
At 31 December 2015	120,080	-	963	6,474	127,517
Less current portion	2,000	-	-	4,115	6,115
Non-current portion	118,080	-	963	2,359	121,402

1 The provision represents the discounted values of the estimated cost to decommission and rehabilitate the mines at the expected date of closure of each of the mines. The present value of the provision has been calculated using a real pre-tax annual discount rate, based on a US Treasury bond of an appropriate tenure adjusted for the impact of quantitative easing as at 31 December 2015 and 2014 respectively, and the cash flows have been adjusted to reflect the risk attached to these cash flows. Uncertainties on the timing for use of this provision include changes in the future that could impact the time of closing the mines, as new resources and reserves are discovered. The discount rate used was 0.07% (2014: 0.02%).

2 On the basis that no profit was recognised by the Peruvian companies of the Group, no legal or voluntary provision has been recognised as at 31 December 2015 and 2014.

3 Corresponds to the provision related to awards granted under the Long Term Incentive Plan to designated personnel of the Group. Includes the following benefits: (i) 2015 awards, granted in March 2015, payable in March 2018 (Ii) 2014 awards, granted in March 2014, payable in March 2017. Only employees who remain in the Group's employment on the vesting date will be entitled to a cash payment, subject to exceptions approved by the Remuneration Committee of the Board. The provision represents the discounted values of the estimated cost of the long-term employee benefit. In 2015 there is change to the provision and corresponding expense of US$369,000 (2014: US$-1,285,000) that is disclosed under administrative expenses US$372,000 (2014: US$-1,064,000), exploration expenses US$-3,000 (2014: US$-221,000).

4 Based on the 2015 and 2014 internal review of mine rehabilitation budgets, an increase of US$15,517,000 (2014: US$27,829,000) was recognised, of which US$7,590,000 (2014: US$9,088,000) related to project already closed and has therefore been recognised directly in the income statement.

27 Deferred income tax

The changes in the net deferred income tax assets/(liabilities) are as follows:

	As at 31 December
	2015 US$000	2014 US$000
Beginning of the year	(83,385)	(91,089)
Income statement charge (note 14)	23,850	8,853
Deferred income tax arising on net unrealised gains cash flow hedges recognised in equity (note 14)	(4,739)	(1,216)
Others	-	67
End of the year	(64,274)	(83,385)

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to the same fiscal authority.

The movement in deferred income tax assets and liabilities before offset during the year is as follows:

	Differences in cost of PP&E US$000	Mine development US$000	Financial instruments US$000	Others US$000	Total US$000
Deferred income tax liabilities
At 1 January 2014	34,464	91,183	2,109	3,018	130,774
Income statement (credit)/charge	7,453	(11,202)	-	(844)	(4,593)
Deferred income tax arising on net unrealised gains cash flow hedges recognised in equity	-	-	1,216	-	1,216
At 31 December 2014	41,917	79,981	3,325	2,174	127,397
Income statement (credit)/charge	6,050	(19,874)	-	2,588	(11,236)
Deferred income tax arising on net unrealised gains cash flow hedges recognised in equity	-	-	4,739	-	4,739
At 31 December 2015	47,967	60,107	8,064	4,762	120,900

The amounts after offset, as presented on the face of the Statement of Financial Position, are as follows:

	As at 31 December
	2015 US$000	2014 US$000
Deferred income tax liabilities	(64,274)	(84,959)

	Differences in cost of PP&E US$000	Provision for mine closure US$000	Tax losses US$000	Mine developmentUS$000	Financial instruments US$000	Others US$000	Total US$000
Deferred income tax assets
At 1 January 2014	18,426	12,832	640	-	2,394	5,393	39,685
Income statement credit/(charge)	(8,879)	1,703	7,911	697	(132)	2,960	4,260
Foreign exchange effect	-	-	-	-	-	67	67
At 31 December 2014	9,547	14,535	8,551	697	2,262	8,420	44,012
Income statement credit/(charge)	(1,685)	8,318	8,263	257	(9)	(2,530)	12,614
At 31 December 2015	7,862	22,853	16,814	954	2,253	5,890	56,626

The amounts after offset, as presented on the face of the Statement of Financial Position, are as follows:

	As at 31 December
	2015 US$000	2014 US$000
Deferred income tax assets	-	1,574

Tax losses expire in the following years:

	As at 31 December
	2015 US$000	2014 US$000
Unrecognised
Expire in one year	1,075	-
Expire in two years	2,733	1,256
Expire in three years	3,903	3,184
Expire in four years	3,978	6,017
Expire after four years	109,315	108,143
	121,004	118,600

Other unrecognised deferred income tax assets comprise (gross amounts):

	As at 31 December
	2015 US$000	2014 US$000
Provision for mine closure1	66,577	55,637
Impairments of assets2	14,692	(493)

1 This relates to provision for mine closure expenditure which is expected to be incurred in periods in which taxable profits are not expected against which the expenditure can be offset.

2 Related to the impairment of San Felipe and Volcan project (2014: Corresponds to the reversal of impairment of San Felipe project) (note 17).

Unrecognised deferred tax liability on retained earnings

At 31 December 2015, there was no recognised deferred tax liability (2014: nil) for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries as the intention is that these amounts are permanently reinvested.

28 Dividends paid and proposed

	2015 US$000	2014 US$000
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2014: US$Nil (2013: US$Nil)	-	-
Interim dividend for 2015: US$Nil (2014: US$Nil)	-	-
Dividends declared to non-controlling interests: US$Nil (2014: US$0.04 and US$Nil)	-	5,542
Dividends declared and paid	-	5,542
Dividends declared to non-controlling interests: US$Nil (2014: US$0.04)	-	1,719
Dividends declared and not paid	-	1,719
Total dividends declared	-	7,261
Final dividend for 2015: US$Nil (2014: US$Nil)	-	-

Dividends per share

The Directors of the Company are not recommending a dividend in respect of the year ended 31 December 2015 and 31 December 2014.

29 Related-party balances and transactions

(a) Related-party accounts receivable and payable

The Group had the following related-party balances and transactions during the years ended 31 December 2015 and 2014. The related parties are companies owned or controlled by the main shareholder of the parent company or associates.

	Accounts receivable as at 31 December		Accounts payable as at 31 December
	2015 US$000	2014 US$000	2015 US$000	2014 US$000
Current related party balances
Cementos Pacasmayo S.A.A.1	11	45	40	49
Total	11	45	40	49

1 The account receivable relates to reimbursement of expenses paid by the Group on behalf of Cementos Pacasmayo S.A.A. The account payable relates to the payment of rentals.

As at 31 December 2015 and 2014, all accounts are, or were, non-interest bearing. No security has been granted or guarantees given by the Group in respect of these related party balances.

Principal transactions between affiliates are as follows:

	Year ended
	2015 US$000	2014 US$000
Expenses
Expense recognised for the rental paid to Cementos Pacasmayo S.A.A.	(285)	(185)

Transactions between the Group and these companies are on an arm's length basis.

(b) Compensation of key management personnel of the Group

	As at 31 December
	2015 US$000	2014 US$000
Short-term employee benefits	5,613	5,369
Long Term Incentive Plan, Deferred Bonus Plan and Restricted Share Plan	2,641	679
Total compensation paid to key management personnel	8,254	6,048

This amount includes the remuneration paid to the Directors of the parent company of the Group of US$4,155,759 (2014: US$4,005,780), out of which US$Nil (2014: US$160,462) relates to pension payments.

(c) Participation in rights issue by Pelham Investment Corporation ("Pelham") and Inversiones ASPI SA ("ASPI")

As at the record date of the rights issue, Eduardo Hochschild held his investment in the Company through Pelham. Following receipt of its entitlement under the rights issue, Pelham transferred, for nil consideration, its nil paid rights in respect of 74,745,101 new ordinary shares to ASPI an entity that is also under the control of Eduardo Hochschild. Under the terms of an irrevocable undertaking signed between Pelham, ASPI and the Company, it was agreed that:

(i) ASPI would, among other things, subscribe for at least 68,887,508 new ordinary shares at an issue price of 47 pence per new ordinary share (the "Subscription Commitment"); and

(ii) the Company would, among other things, pay ASPI a fee of 1% of the Subscription Commitment of approximately US$500,000.

30 Mining royalties

Peru

In accordance with Peruvian legislation, owners of mining concessions must pay a mining royalty for the exploitation of metallic and non‑metallic resources. Mining royalties have been calculated with rates ranging from 1% to 3% of the value of mineral concentrate or equivalent sold, based on quoted market prices.

In October 2011 changes came into effect for mining companies, with the following features:

a) Introduction of a Special Mining Tax ('SMT'), levied on mining companies at the stage of exploiting mineral resources. The additional tax is calculated by applying a progressive scale of rates ranging from 2% to 8.4%, of the quarterly operating profit.

b) Modification of the mining royalty calculation, which consists of applying a progressive scale of rates ranging from 1% to 12%, of the quarterly operating profit. The former royalty was calculated on the basis of monthly sales value of mineral concentrates.

The SMT and modified mining royalty are accounted for as an income tax in accordance with IAS 12 "Income Taxes".

c) For companies that have mining projects benefiting from tax stability regimes, mining royalties are calculated and recorded as they were previously, applying an additional new special charge on mining that is calculated using progressive scale rates, ranging from 4% to 13.12% of quarterly operating profit.

d) In the case of the Arcata mine unit, the company quit the tax stability agreement, but has mantained the agreement for the mining royalties, such that the Arcata unit, is liable for the new SMT but the mining royalties remain payable at the same rate as they were, before the modification in 2011.

As at 31 December 2015, the amount payable as under the former mining royalty (for the Arcata mining unit), the new mining royalty (for the Ares, Pallancata and Inmaculada mining units), and the SMT amounted to US$272,000 (2014: US$395,000), US$1,080,000 (2014: US$266,000), and US$745,000 (2014: US$Nil) respectively. The former mining royalty is recorded as 'Trade and other payables', and the new mining royalty and SMT as 'Income tax payable' in the Statement of Financial Position. The amount recorded in the income statement was US$1,205,000 (2014: US$1,279,000) representing the former mining royalty, classified as cost of sales, US$1,778,000 (2014: US$1,611,000) of new mining royalty and US$755,000 (2014: US$375,000) of SMT, both classified as income tax.

Argentina

In accordance with Argentinian legislation, Provinces (being the legal owners of the mineral resources) are entitled to request royalties from mine operators. For San Jose, the mining royalty was originally fixed at 1.85% of the pit-head value of the production where the final product is dore and 2.55% where the final product is mineral concentrate or precipitates. In October 2012 a new provincial law was passed, which increased the mining royalty applicable to dore and concentrate to 3% of the pit-head value. Since November 2012 Minera Santa Cruz S.A. has been paying and expensing the increased 3% royalty although it has filed an administrative claim against the new law. As at 31 December 2015, the amount payable as mining royalties amounted to US$524,000 (2014: US$556,000). The amount recorded in the income statement as cost of sales was US$4,763,000 (2014: US$5,302,000).

On 13 June 2013, the congress of the Province of Santa Cruz passed Law No. 3318, which created a tax on mining reserves. Accordingly, the owners of mining concessions located in the Province of Santa Cruz must pay a tax on mining reserves at a rate of 1%, calculated at the end of each year and determined according to the international price of metals at that date. According to these regulations, the tax applies only on "proved reserves" and certain deductions (related to the production cost) apply. Minera Santa Cruz S.A. (a subsidiary of Hochschild Mining plc) is affected by this tax. On 20 December 2013, Minera Santa Cruz S.A. filed before the Argentine Supreme Court a legal claim against the tax on mining reserves. Such legal claim challenges the legality of the tax on mining reserves arguing its unconstitutionality on the grounds that it violates the Federal Mining Policy created by national law No. 24.196. Additionally, on 2 November 2015, Minera Santa Cruz S.A. filed a precautionary measure under which it requested the Argentine Supreme Court to order the Province of Santa Cruz not to claim to Minera Santa Cruz S.A. the payment of any amount related to the tax on mining reserves until a final decision on the constitutionality of the tax is rendered. The precautionary measure was granted on 9 December 2015, furthermore no tax was paid during 2015. As at 31 December 2015, the amount payable as tax on mining reserves was US$4,054,000 (2014: US$4,088,000) recorded as 'Trade and other payables'. The amount recorded in the income statement was US$441,000 (2014: US$3,453,000) as other expenses. The tax on mining reserves was eliminated on 30 December 2015.

31 Subsequent events

a) On 11 February 2016, the Group signed a zero cost collar contract with JP Morgan Chase Bank, National Association, London Branch over 2,999,997 ounces of silver at a call/put price of US$17.60 and US$14.00 per ounce, from 12 February to 30 December 2016. In addition, on 12 February 2016, the Group signed a commodity swap contract with Citibank, NA to hedge 15,000 ounces of gold at a price of US$1,244.25 per ounce from 12 February to 30 December 2016.

b) On 12 February 2016, the Argentinian government published Decreto 349/2016 that eliminated the export tax on the sale of concentrate.

Profit by operation¹

(Segment report reconciliation) as at 31 December 2015

Company (US$000)	Arcata	Pallancata	Inmaculada	San Jose	Consolidation adjustment and others	Total/HOC
Revenue	107,425	73,045	102,303	186,097	276	469,146
Cost of sales (Pre consolidation)	(107,803)	(88,999)	(52,532)	(153,093)	(2,744)	(405,171)
Consolidation adjustment	165	(194)	(2,621)	(94)	2,744	-
Cost of sales (Post consolidation)	(107,638)	(89,193)	(55,153)	(153,187)	-	(405,171)
Production cost excluding depreciation	(71,128)	(51,599)	(32,765)	(109,615)	-	(265,107)
Depreciation in production cost	(33,360)	(35,725)	(27,243)	(43,205)	-	(139,533)
Other items	(2,133)	(1,610)	(1,544)	(5,499)	-	(10,786)
Change in inventories	(1,017)	(259)	6,399	5,132	-	10,255
Gross profit	(378)	(15,954)	49,771	33,004	(2,468)	63,975
Administrative expenses	-	-	-	-	(38,148)	(38,148)
Exploration expenses	-	-	-	-	(9,255)	(9,255)
Selling expenses	(962)	(1048)	(12)	(19,707)	-	(21,729)
Other income/expenses	-	-	-	-	(7,243)	(7,243)
Operating profit before impairment	(1,340)	(17,002)	49,759	13,297	(57,114)	(12,400)
Impairment of assets	-	-	-	-	(207,146)	(207,146)
Finance income	-	-	-	-	1,898	1,898
Finance costs	-	-	-	-	(32,900)	(32,900)
FX loss	-	-	-	-	(5,627)	(5,627)
Profit/(loss) from continuing operations before income tax	(1,340)	(17,002)	49,759	13,297	(300,889)	(256,175)
Income tax	-	-	-	-	16,518	16,518
Profit/(loss) for the year from continuing operations	(1,340)	(17,002)	49,759	13,297	(284,371)	(239,657)

1 On a post exceptional basis.

RESERVES AND RESOURCES

Ore reserves and mineral resources estimates

Hochschild Mining plc reports its mineral resources and reserves estimates in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 edition ("the JORC Code"). This establishes minimum standards, recommendations and guidelines for the public reporting of exploration results and mineral resources and reserves estimates. In doing so it emphasises the importance of principles of transparency, materiality and confidence. The information on ore reserves and mineral resources on pages 65 to 69 were prepared by or under the supervision of Competent Persons (as defined in the JORC Code). Competent Persons are required to have sufficient relevant experience and understanding of the style of mineralisation, types of deposits and mining methods in the area of activity for which they are qualified as a Competent Person under the JORC Code. The Competent Person must sign off their respective estimates of the original mineral resource and ore reserve statements for the various operations and consent to the inclusion of that information in this report, as well as the form and context in which it appears.

Hochschild Mining plc employs its own Competent Person who has audited all the estimates set out in this report. Hochschild Mining Group companies are subject to a comprehensive programme of audits which aim to provide assurance in respect of ore reserve and mineral resource estimates. These audits are conducted by Competent Persons provided by independent consultants. The frequency and depth of an audit depends on the risks and/or uncertainties associated with that particular ore reserve and mineral resource, the overall value thereof and the time that has lapsed since the previous independent third-party audit.

The JORC Code requires the use of reasonable economic assumptions. These include long-term commodity price forecasts (which, in the Group's case, are prepared by ex-house specialists largely using estimates of future supply and demand and long-term economic outlooks).

Ore reserve estimates are dynamic and are influenced by changing economic conditions, technical issues, environmental regulations and any other relevant new information and therefore these can vary from year-to-year. Mineral resource estimates can also change and tend to be influenced mostly by new information pertaining to the understanding of the deposit and secondly the conversion to ore reserves.

The estimates of ore reserves and mineral resources are shown as at 31 December 2015, unless otherwise stated. Mineral resources that are reported include those mineral resources that have been modified to produce ore reserves. All tonnage and grade information has been rounded to reflect the relative uncertainty in the estimates; there may therefore be small differences. The prices used for the reserves calculation were: Au Price: US$1,200 per ounce and Ag Price: US$20 per ounce.

ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 20151

Reserve category	Proved and probable (t)	Ag (g/t)	Au (g/t)	Ag (moz)	Au (koz)	Ag Eq (moz)
OPERATIONS¹
Arcata
Proved	652,377	347	1.1	7.3	22.6	8.6
Probable	881,991	311	1.1	8.8	31.0	10.7
Total	1,534,369	326	1.1	16.1	53.6	19.3
Inmaculada²
Proved	2,950,174	126	4.1	12.0	391.2	35.4
Probable	4,025,378	155	4.5	20.1	584.5	55.2
Total	6,975,552	143	4.4	32.0	975.7	90.6
Pallancata
Proved	618,107	286	1.5	5.7	29.6	7.5
Probable	614,625	261	1.2	5.2	24.4	6.6
Total	1,232,732	274	1.4	10.9	54.0	14.1
San Jose
Proved	626,967	521	7.4	10.5	149.7	19.5
Probable	334,696	414	6.5	4.5	70.1	8.7
Total	961,663	484	7.1	15.0	149.7	28.1
Total
Proved	4,847,625	227	3.8	35.4	593.2	71.0
Probable	5,856,689	205	3.8	38.5	710.0	81.1
TOTAL	10,704,315	215	3.8	73.9	1,303.1	152.1

Note: Where reserves are attributable to a joint venture partner, reserve figures reflect the Company's ownership only. Includes discounts for ore loss and dilution.

1 Operations were audited by P&E Consulting.

2 Inmaculada reserves and resources as published in the Feasibility Study released on 11 January 2012. Prices used for reserves calculation: Au: $1,100/oz and Ag: $18/oz.

ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2015

Resource category	Tonnes (t)	Ag (g/t)	Au (g/t)	Zn (%)	Pb (%)	Cu (%)	Ag Eq (g/t)	Ag (moz)	Au (koz)	Ag Eq (moz)	Zn (kt)	Pb (kt)	Cu (kt)
OPERATIONS
Arcata
Measured	1,758,822	457	1.41	-	-	-	542	25.9	79.5	30.6	-	-	-
Indicated	2,086,114	370	1.27	-	-	-	447	24.8	85.5	30.0	-	-	-
Total	3,844,936	410	1.33	-	-	-	490	50.7	165.0	60.6	-	-	-
Inferred	4,348,694	335	1.22	-	-	-	408	46.8	170.2	57.0	-	-	-
Inmaculada¹
Measured	2,707,568	155	5.05	-	-	-	458	13.5	439.4	39.8	-	-	-
Indicated	3,793,491	188	5.41	-	-	-	513	22.9	660.4	62.6	-	-	-
Total	6,501,060	174	5.26	-	-	-	490	36.4	1,099.8	102.4	-	-	-
Inferred	3,733,302	124	2.98	-	-	-	303	14.9	357.6	36.3	-	-	-
Pallancata
Measured	2,442,908	360	1.71	-	-	-	463	28.2	134.7	36.3	-	-	-
Indicated	1,050,863	289	1.37	-	-	-	371	9.8	46.3	12.5	-	-	-
Total	3,493,771	338	1.61	-	-	-	435	38.0	181.0	48.9	-	-	-
Inferred	4,305,774	283	1.14	-	-	-	352	39.2	158.1	48.7	-	-	-
San Jose
Measured	1,015,679	575	8.33	-	-	-	1,075	18.8	272.1	35.1	-	-	-
Indicated	1,251,369	395	5.69	-	-	-	737	15.9	229.1	29.6	-	-	-
Total	2,267,048	476	6.88	-	-	-	888	34.7	501.2	64.7	-	-	-
Inferred	781,685	390	6.06	-	-	-	754	9.8	152.4	18.9	-	-	-
GROWTH PROJECTS
Crespo²
Measured	5,211,058	47	0.47	-	-	-	75	7.9	78.6	12.6	-	-	-
Indicated	17,298,228	38	0.40	-	-	-	62	21.0	222.5	34.3	-	-	-
Total	22,509,286	40	0.42	-	-	-	65	28.8	301.0	46.9	-	-	-
Inferred	775,429	46	0.57	-	-	-	80	1.1	14.2	2.0	-	-	-
Azuca
Measured	190,602	244	0.77	-	-	-	290	1.5	4.7	1.8	-	-	-
Indicated	6,858,594	187	0.77	-	-	-	233	41.2	168.8	51.3	-	-	-
Total	7,049,197	188	0.77	-	-	-	234	42.7	173.5	53.1	-	-	-
Inferred	6,946,341	170	0.89	-	-	-	223	37.9	199.5	49.9	-	-	-
Volcan³
Measured	105,918,000	-	0.738	-	-	-	44	-	2,511.0	150.7	-	-	-
Indicated	283,763,000	-	0.698	-	-	-	42	-	6,367.0	382.0	-	-	-
Total	389,681,000	-	0.709	-	-	-	43	-	8,878.0	532.7	-	-	-
Inferred	41,553,000	-	0.502	-	-	-	30	-	671.0	40.3	-	-	-
OTHER PROJECTS⁴
Measured	1,393,716	69	0.02	7.12	3.10	0.39	315	3.1	0.9	14.1	99.3	43.1	5.5
Indicated	1,354,261	82	0.06	6.14	2.73	0.31	295	3.6	2.4	12.9	83.2	37.0	4.2
Total	2,747,977	76	0.04	6.64	2.92	0.35	305	6.7	3.3	27.0	182.4	80.1	9.7
Inferred	13,445,001	8	0.30	0.58	0.21	1.22	160	3.4	128.6	69.0	77.8	28.5	163.6
GRAND TOTAL
Measured	120,638,353	25	0.91	0.08	0.04	0.00	83	97.5	3,520.9	321.1	99.3	43.1	5.5
Indicated	317,455,921	14	0.76	0.03	0.01	0.00	60	143.2	7,782.0	615.2	83.2	37.0	4.2
Total	438,094,275	17	0.80	0.04	0.02	0.00	66	240.7	11,302.9	936.3	182.4	80.1	9.7
Inferred	75,889,227	63	0.76	0.10	0.04	0.22	132	136.1	1,851.4	322.2	77.8	28.5	163.6

1 Inmaculada resources as published in the Feasibility Study released on 11/01/ 2012. Prices used for resources calculation: Au: $1,100/oz and Ag: $18/oz

2 Prices used for resources calculation: Au: $1,200/oz and Ag: $20/oz.

3 Resources reported in the NI 43-101 Technical Report published by Andina Minerals, January 2011. Price used for resources calculation: Au: $950/oz.

4 Includes the Jasperoide copper project and the San Felipe zinc/silver project. The silver equivalent grade (147 g/t Ag Eq) has being calculated applying the following ratios, Cu/Ag=96.38 and Au/Ag=60

CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES

Ag equivalent content (million ounces)	Category	Percentage attributable December 2014	December 2014 Att.¹	December 2015 Att.¹	Net difference	% change
Arcata	Resource	100%	108.7	117.6	8.9	8.2
	Reserve		25.6	19.3	(6.3)	(24.5)
Inmaculada	Resource	100%	149.7	138.7	(10.9)	(7.3)
	Reserve		81.1	90.6	9.5	11.7
Pallancata	Resource	100%	80.7	97.6	16.9	21.0
	Reserve		18.7	14.1	(4.6)	(24.5)
San Jose	Resource	51%	87.7	83.7	(4.0)	(4.6)
	Reserve		27.5	28.1	(0.6)	(2.2)
Crespo	Resource	100%	48.9	48.9	-	-
	Reserve		-	-	-	-
Azuca	Resource	100%	103.0	103.0	-	-
	Reserve		-	-	-	-
Volcan	Resource	100%	572.9	572.9	-	-
	Reserve		-	-	-	-
	Reserve		-	-	-	-
Other projects total	Resource	100%	96.0	96.0	-	-
	Reserve		-	-	-	-
Total	Resource		1,247.6	1,258.5	(10.9)	(0.9)
	Reserve		152.9	152.1	(0.7)	(0.5)

1 Attributable reserves and resources based on the Group's percentage ownership of its joint venture projects.

TOTAL RESOURCES: PRICE ASSUMPTION SENSITIVITY ANALYSIS (OPERATIONS)

The below table is based on internal calculations and has not been audited by the external third party consultant.

	1,200/Au oz & 20/Ag oz				1,200/Au oz & 17/Ag oz
Resources	Tonnes	Ag Eq (g/t	Ag Eq (moz	Tonnes		Ag Eq (g/t	Ag Eq (moz
Measured	8,900,825	614	175,640,365	8,667,406		626	174,538,787
Indicated	9,384,134	541	163,175,127	9,055,796		555	161,569,307
Inferred	13,920,487	400	179,221,889	13,039,859		418	175,372,258
Total	32,205,447	500	518,037,382	30,763,062		517	511,480,352
Variation (%)	-	-	-	(4%)		3%	(1%)

Reserves
Proven	5,450,005	512	89,719,230	5,157,545		522	86,529,372
Probable	6,178,260	450	89,443,807	5,810,036		461	86,152,341
Total	11,628,265	479	179,163,037	10,967,581		490	172,681,714
Variation (%)	-	-	-	(6%)		2%	(4%)

¹On a pre-exceptional basis

²Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs, foreign exchange loss and income tax plus depreciation, and exploration expenses other than personnel and other exploration related fixed expenses and other non-cash expenses

³All-in sustaining cost per silver equivalent ounce: Calculated before exceptional items and includes cost of sales less depreciation and change in inventories, administrative expenses, brownfield exploration, operating capex and royalties divided by silver equivalent ounces produced using a gold ratio of 74:1

⁴All equivalent figures assume the average gold/silver ratio for 2015 of 74:1 unless otherwise stated

⁵Revenue presented in the financial statements is disclosed as net revenue (in the Financial Review it is calculated as gross revenue less commercial discounts)

⁶All-in sustaining cash cost per silver equivalent ounce: Calculated before exceptional items includes cost of sales less depreciation and change in inventories, administrative expenses, brownfield exploration, operating capex and royalties divided by silver equivalent ounces produced using a ratio of 74:1 (Au/Ag). Also includes commercial discounts and selling expenses divided by silver equivalent ounces sold using a ratio of 74:1 (Au/Ag).

⁷Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales.

⁸Other revenue includes revenue from (i) the sale of energy in Peru and, (ii) administrative services in Mexico.

⁹Unit cost per tonne is calculated by dividing mine and geology costs by extracted tonnage and plant and other costs by treated tonnage.

¹⁰Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales.

¹¹ All-in sustaining cash cost per silver equivalent ounce: Calculated before exceptional items includes cost of sales less depreciation and change in inventories, administrative expenses, brownfield exploration, operating capex and royalties divided by silver equivalent ounces produced using a ratio of 60:1 (Au/Ag) for 2014 and 74:1 for 2015. Also includes commercial discounts and selling expenses divided by silver equivalent ounces sold using a ratio of 60:1 (Au/Ag).

¹² In 2014, Adjusted EBITDA has been presented before the effect of significant non-cash expenses related to changes in mine closure provisions for those mines which have already closed as these were material.

¹³Includes pre-shipment loans and short term interest payables.

¹⁴Includes additions in property, plant and equipment and evaluation and exploration assets (confirmation of resources) and excludes increases in the expected closure costs of mine asset

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